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66 ADVANCED ACCOUNTING. CALCULATION OF INTEREST. When, on a dissolution, one partner goes out and another continues the business, the question of interest frequently arises in practice, although (UT the absence of a special agreement) all calculation of interest ceases at the date of dissolution, even if the partnership articles provide for interest on capital. When the continuing partner also continues the old books, the adjustment of this problem can usually be best effected by raising an Account Current niiiside the books altogether. The following example will show what is meant better than any general explanation: — PROBLEM.—M. & N. being equal partners agree to dissolve as from 31st December 1900, and the following is their position :— They owe creditors £g(>o, they have debtors ;^3,6oo, and office effects /'200. M. is to realise the debts, to pay the liabilities, to take over the office effects at /"180, to allow N. /'500 for his share of goodwill, and to pay him his proportion as realised. The debts realise less by ;^8o, and after payment of creditors they are realised at an average date of six months from the date of dissolution. M. pays N. /'i,ooo at the end of three months, and the balance at the end of twelve months, with interest at 5 per cent, per annum. What must he then pay ? Dr. N . , IN ACCOUNT WITH M. Cr. 1901 Mar. 31 Dec. 31 To Cash „ Balance of Interest .. „ Balance down (beins amount due to N., including Interest) Interest {, s d 37 10 o 24 0 o £61 10 Cash £ s d 1,000 o o 894 o o £1.894 o I90I Jan. June 30 Dec. 31 igo2 Jan. By HalfShare of Office Effects taken over by M. at £i8o.. „ HalfShare of Goodwill .. „ Half Share of Proceeds of Book Debts, less amount dne to Creditors (£3,520 £96o = £2,56o) .. „ Interest to date By Balance down . Interest £ s 4 10 25 0 32 0 £01 10 d 0 0 0 0 Cash £ 90 500 1,280 24 £1,894 S94 s 0 0 0 0 0 0 d 0 0 0 0 0 0 AVERAGE DUE DATE. The problem just considered suggests that, of the numerous items making up the debts received and the liabilities paid, the "average date" of settlement was the 30th June 1901. This question of average date frequently arises in connection with interest calculations, as affording in many in.stances by far the simplest method of computing the actual amount of interest to be taken into account. The present seems therefore a suitable opportunity for explaining how such calculations are made. For the sake of simplicity, only a limited number of items will be assumed. Let us suppose that the Book Debts collected are made up as follows : — 1901 April 10 „ II July 19 Sept. 2 £ 1,000 120 1,400 1,000 /•3.520
Beschrijving voorwerp
Titel  Advanced accounting 
Auteur  Dicksee, Lawrence Robert 
Jaartal  1903 
Collectienaam  NIVRA Limperg, UBVU gedigitaliseerd 
PPN  34448369X 
Toegangsgegevens (URL)  http://imagebase.ubvu.vu.nl/getobj.php?ppn=34448369X 
Signatuur origineel  LIMPERG295 
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Titel  LIMPERG295_00078 
Transcript  66 ADVANCED ACCOUNTING. CALCULATION OF INTEREST. When, on a dissolution, one partner goes out and another continues the business, the question of interest frequently arises in practice, although (UT the absence of a special agreement) all calculation of interest ceases at the date of dissolution, even if the partnership articles provide for interest on capital. When the continuing partner also continues the old books, the adjustment of this problem can usually be best effected by raising an Account Current niiiside the books altogether. The following example will show what is meant better than any general explanation: — PROBLEM.—M. & N. being equal partners agree to dissolve as from 31st December 1900, and the following is their position :— They owe creditors £g(>o, they have debtors ;^3,6oo, and office effects /'200. M. is to realise the debts, to pay the liabilities, to take over the office effects at /"180, to allow N. /'500 for his share of goodwill, and to pay him his proportion as realised. The debts realise less by ;^8o, and after payment of creditors they are realised at an average date of six months from the date of dissolution. M. pays N. /'i,ooo at the end of three months, and the balance at the end of twelve months, with interest at 5 per cent, per annum. What must he then pay ? Dr. N . , IN ACCOUNT WITH M. Cr. 1901 Mar. 31 Dec. 31 To Cash „ Balance of Interest .. „ Balance down (beins amount due to N., including Interest) Interest {, s d 37 10 o 24 0 o £61 10 Cash £ s d 1,000 o o 894 o o £1.894 o I90I Jan. June 30 Dec. 31 igo2 Jan. By HalfShare of Office Effects taken over by M. at £i8o.. „ HalfShare of Goodwill .. „ Half Share of Proceeds of Book Debts, less amount dne to Creditors (£3,520 £96o = £2,56o) .. „ Interest to date By Balance down . Interest £ s 4 10 25 0 32 0 £01 10 d 0 0 0 0 Cash £ 90 500 1,280 24 £1,894 S94 s 0 0 0 0 0 0 d 0 0 0 0 0 0 AVERAGE DUE DATE. The problem just considered suggests that, of the numerous items making up the debts received and the liabilities paid, the "average date" of settlement was the 30th June 1901. This question of average date frequently arises in connection with interest calculations, as affording in many in.stances by far the simplest method of computing the actual amount of interest to be taken into account. The present seems therefore a suitable opportunity for explaining how such calculations are made. For the sake of simplicity, only a limited number of items will be assumed. Let us suppose that the Book Debts collected are made up as follows : — 1901 April 10 „ II July 19 Sept. 2 £ 1,000 120 1,400 1,000 /•3.520 
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