MING CHEF RESTAURANT
A. Narrative and partnership agreementThere are four partners in
this business, they are: Jerry, Jimmy, Kuang and Steve.
Jerry originally owned a convenience store in Haymarket called
Mini-Mart, his primary customers were students, so when the new
Central Park Living Mall opened it significantly reduced his
profits as most of his customers went over there instead of his
convenience store. Mini-Mart never recovered and eventually Jerry
had to sell off his business at a loss, but Jerry didnt give up he
wanted to win back his customers from Central Park and make new
customers not just students by opening a bigger and better
business. On April 2nd he decided he wanted it to be a Chinese
restaurant as he was Chinese and it had a large market, so he
decided to find some partners.
Jimmy was a manager at a famous restaurant in Sydney, China
Republic. Jerry approached him first because of his experience in
the food industry and knew a lot about customers and how the
restaurant operated.
Kuang was next; he was a full time student at UTS business
school and had learnt a lot about how to operate a business. He
knew Jerry and he used to frequent the convenience store and still
did after the opening of the Central Living Mall.
Steve is a long time friend of Jerry, they met in high school
and afterwards he travelled the world. He eventually ended up in
Beijing and lived there for twelve years, he had been apprentice to
a head chef in renowned Beijing restaurant and decided to come back
to Sydney to restart his life there. He talked to Jerry and they
both agreed to Steve becoming a partner.
On the 14th April 2015 the partners signed the Partnership
Agreement, which stated the contributions of each partner, the
allocations of the profits and withdrawal, additional capital,
capital accounts and all the other important information.
The business will be called MING Chef. It is a Chinese
restaurant, which is located at 120 Kent St. Town Hall, Sydney. It
serves food and provides quality service. The restaurant appeals to
all but targets business people, students and tourists. The
competitive edge this business is the special Beijing Duck, made by
head chef Steve, which is considered number one in China.
. Partnership agreement
B. COMMENCEMENT OF BUSINESSThe business commenced operations on
15th May 2015. The start up costs totalled $500,000, which was
divided among the partners.
Jimmy also had a flat screen television he offered to Jerry to
use in the restaurant, both Jerry and Jimmy agreed on giving Jimmy
25% of the business after he contributed $125,000.
Jerry saw Kuang was loyal and could offer the business a
different perspective from him and Jimmy and gave him 20% when he
contributed $100,000.
Steve offered the business a competitive edge in the Beijing
Duck he learnt from in China, helped make the menu and was the head
chef; both he and Jerry agreed that he should get 25% when he also
gave $125,000.
Jerry received the rest of the business, which was 30% and he
contributed $150,000 to his restaurant.
1. Each partner accountsMing Chef RestaurantGeneral Journal
Entries of the capital contributed by the partnerSeptember 2014Date
NameDebitCredit
September 2014Cash Kuang capitalCapital contributed
Kuang$36,000$36,000
Cash Jerry capitalCapital contributed Jerry$54,000$54,000
Cash Jimmy capitalCapital contributed Jimmy$45,000$45,000
Cash Steve capitalCapital contributed Steve$45,000$45,000
2. Statement of financial positionMing Chef RestaurantStatement
of Financial PositionAssets2014
Current asset
Cash$180,000
Total assets $180,000
Equity
Kuang$36,000
Jerry$54,000
Jimmy$45,000
Steve$45,000
Total Equity$180,000
C. Accounting for changes in equity ( Drawings, profit nad
losses)It is June 30th the business: Ming Chef has been open for a
month and a half. It is now fully operational after buying
furniture, like chairs, tables, counters and other essentials,
equipment for the chefs and cleaners and staff for the restaurant
that are paid well. The business operations are separated, the
chefs prepare and cook the food for customers, the waiters serve
customers, accept phone calls for functions and bookings and clear
tables and management plan how to help grow the business with
marketing, management also manages the accounting for the
restaurant.Overall Ming Chef is successful but the partners are not
satisfied, as they want it to be the best Chinese restaurant not
just an average one. They are making profits but not big enough and
they are customers but not enough to be the best, the partners are
thinking about adding another partner, someone who can attract more
customers to the business and generate more profits.
TRIAL BALANCE FOR THE MING CHEF RESTAURANTAT THE END OF 30
SEPTEMBER 2015 Account nameDebitCredit
Cash180,000
Accounts Receivable20,000
Inventory70,000
Prepaid Insurance9,000
Furniture145,000
Accumulated Depreciation - Furniture10,000
Equipment142,000
Accumulated Depreciation - Equipment12,000
Accounts Payable23,500
Bank Loan40,000
Capital-Kuang100,000
Capital-Jerry150,000
Capital-Jimmy125,000
Capital-Steve125,000
Drawings-Kuang 35,000
Drawings-Jerry45,000
Drawings-Jimmy 37,000
Drawings-Steve 32,000
Service Revenue349,500
Cost of Goods Sold 60,000
Rent30,000
Wages15,000
Insurance6,000
Stationery1,000
Depreciation8,000
Water Expenses20000
Gas Expenses45000
Electricity Expenses35000
Advertising Expenses12000
Administrative Expenses10500
Other Expenses8000
TOTAL935,000935,000
MING CHEF RESTAURANTJournal Entries to close income and expenses
Accounts
DateParticularsDebit ($)Credit ($)
Income summary190500
Rent30000
Wages15000
Insurance6000
Stationery1000
Depreciation8000
Water Expenses20000
Gas Expenses45000
Electricity Expenses35000
Advertising Expenses12000
Administrative Expenses10500
Other Expenses8000
Closing Expenses Summary
Service Revenue349500
Income Summary349500
Closing Revenue Account
JOURNAL ENTRY TO ALLOCATE PROFITSMing Chef RestaurantJournal
Entry to allocate profits
DateParticularsDebit ($)Credit ($)
Income summary99000
Kuang, current19800
Jerry, current29700
Jimmy, current24750
Steve, current24750
Profits allocated to partners
JOURNAL ENTRY OF PARTNERS DRAWINGSMing Chef RestaurantJournal
Entry of partners drawings
DateParticularsDebit ($)Credit ($)
Current- Kuang35000
Drawing- Kuang35000
Current- Jerry45000
Drawing- Jerry45000
Current- Jimmy37000
Drawing- Jimmy37000
Current- Steve32000
Drawing- Steve32000
Drawing accounts closed
STATEMENT OF COMPREHENSIVE INCOMEMing Chef RestaurantStatement
of comprehensive incomeFor the month ended 30 Sep
Service Revenue349500
Cost of goods sold60000
Gross Profit289500
Expenses
Rent30000
Insurance15000
Stationery1000
Depreciation8000
Water Expenses20000
Gas Expenses45000
Electricity Expenses35000
Advertising Expenses12000
Administrative Expenses10500
Wages15000
Other Expenses8000
Total Expenses190500
Net Profit99000
Allocation of profit
To Kuang19800
To Jerry29700
To Jimmy24750
To Steve24750
Total99000
STATEMENT OF CHANGE IN EQUITYMing Chef RestaurantStatement of
changes in equityFor the month ended 30 Sep
PARTNER NAMEKuangJerryJimmySteve
Current account at start0000
Add: Profit19800297002475024750
Less: Drawing35000450003700032000
Current account at end-15200-15300-12250-7250
Add: Fixed capital100000150000125000125000
Ending balance equity84800134700112750117750
Toatl Equity : 450,000
MING CHEF RESTAURANTSTATEMENT OF FINANCIAL POSITION AT 30
SepASSETS2015 ($)
Non- current assets
Furniture135000
Equipment130000
Current assets
Inventory70000
Cash180000
Prepaid insurance9000
Accounts Receivable20000
Total Assets544000
Liabilities and Owners Equity
Current liability
Account payable23500
Non- current liability
Bank Loan40000
Total liability63500
Owners Equity
Kuang84800
Jerry134700
Jimmy112750
Steve117750
Total Owners Equity450000
Total liabilities and owners equity513500
D. Admission of a new partner Evan was an owner of a motorcycle
business in the city next door to Ming Chef. He was a an extremely
good salesman and had a lot of connections with businessmen who
worked in the city, but the demand for motor vehicles was too low
in the city. So he had a meeting with the partners of Ming Chef one
day and offered to sell off his vehicles to join the partnership
and to expand the restaurant into the land where is business is.
That way Ming Chef could host more customers and open a lot of
opportunities, Evan also knew a lot of the big businessmen in the
city who he could introduce to restaurant to make it more well
known.Both parties agreed to the conditions and on November 21st
Evan invested $200,000 into Ming Chef boosting the total
partnership equity and expanding the size of the business. In
return, he wanted to have 1/5 of the total equity as his own
equity. Evan offers to Ming Chef land in a prime location next to
the restaurant, connections with top end business people in the
Sydney CBD, experience from years in the motor vehicle dealership
and great salesmanship.
Worksheet : Calculation of Evans capital and any bonus to the
existing partners
Existing partners equity450,000
Add: Evans investment200,000
Total equity650,000
Evans Capital130,000
Bonus to existing partners70,000
Bonus to Kuang21,000
Bonus to Jerry14,000
Bonus to Jimmy21,000
Bonus to Steve14,000
Journal Entry to admit EvanDateParticularsDebitCredit
Nov 10Income Summary200,000
Kuang, current21,000
Jerry, current14,000
Jimmy, current21,000
Steve, current14,000
Evan, current130,000
Partnership EquityNumberPartner NameEquity
1Kuang105,800
2Jerry148,700
3Jimmy133,750
4Steve131,750
5Evan130,000
Total partnership equity : 650,000
