possible 25 markers

• Assess Nasser, Laura and Brenda's decisions to not charge interest on drawings.

  For:

  • financial perk may attract new partners if the partners ever decide to
  • provides important source of financial support for partners in their personal lives which they otherwise may not withdraw as they cannot afford to pay back the interest
  • partner relationships will not be strained by partners failing to repay interest on drawings
  • the appropriation account will be easier and simpler to complete
• Assess Nasser, Laura and Brenda's decisions to not charge interest on drawings.

  Against:

  • may disgruntle Laura as Nasser and Brenda will not be discouraged from continuing to take more drawings out of the business
  • may discourage new partners from joining if they feel existing partner(s) are taking advantage
  • partners will not receive larger share of profits as interest on drawings is added to residual profit
  • does not deter large amounts of drawings being taken out of business by partners which lowers assets available for business use, albeit possibly only temporarily eg. drawings
• Assess Nasser, Laura and Brenda's decisions to not charge interest on drawings.

  Evaluation:

  • how many assets can the business afford to loan through drawings
  • are salaries given appropriate, why would there be a need to take as much as drawings
  • depends on how much is taken out and whether it is putting the partnership into financial jeopardy
  • opportunity cost - could drawings be used in a way to benefit the entire partnerhip rather than individuals
• With reference to the financial statements you completed for the question on page 19. Assess the impact of Sharon and Tracy admitting Katie as a new partner to a business.

  For:

  • equity is shared equally so they should all be equally motivated to help the partnership succeed
  • Tracey does not see her share of 1/3 change and can now also benefit from additional support with now having 3 partners instead of 2
  • Katie has introduced £30000 capital into the new partnerships which strengthens their financial future
• With reference to the financial statements you completed for the question on page 19. Assess the impact of Sharon and Tracy admitting Katie as a new partner to a business.

  Against:

  • increased chances of clashing on ideas and general vision for the partnership
  • old partners could be suggested to be less influential than the past
  • how goodwill was calculated could leave Katie questioning its accuracy
• With reference to the financial statements you completed for the question on page 19. Assess the impact of Sharon and Tracy admitting Katie as a new partner to a business.

  Evaluation:

  • depends on what Katie is contributing
  • what would have prompted Sharon and Tracey to admit a new partner
  • how does additional capital and support help improve the business
• With reference to q1, assess the usefulness of Chin maintaining a 3 month budget:

  For:

  • Chin holds detailed information on both the receipts and payments
  • enables short term planning as Chin knows the closing balances in August and September are negative so can take appropriate measures if expected receipts in October do not bring the closing balance to positive at the end of the period
  • encourage Chin to be more efficient by keeping costs as low as possible as we can see particularly in the first two months that they may struggle with short term liquidity
• With reference to q1, assess the usefulness of Chin maintaining a 3 month budget:

  Against:

  • it is just a forecast, if the business gets less receipts from credit customers it could take them longer to get back to positive working capital
  • how accurate are the figures, how accurate have they made plans for workforce
  • you would expect wages to increase during September and October when more sales are being made but the figures do not change
• With reference to q1, assess the usefulness of Chin maintaining a 3 month budget:

  Evaluation:

  • how much importance does the business place on this
  • how regularly do they amend and recalculate when circumstances change
  • how useful is it
  • how could they monitor future finances better