MING CHEF RESTAURANT

A. Narrative and partnership agreement

There are four partners in this business, they are: Jerry, Jimmy, Kuang
and Steve.
Jerry originally owned a convenience store in Haymarket called MiniMart, 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. MiniMart 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 BUSINESS
The 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 accounts

Ming Chef Restaurant
General Journal Entries of the capital contributed by the partner
September 2014
Date
September
2014

Name
Cash

Kuang capital
Capital contributed
Kuang
Cash
Jerry capital
Capital contributed Jerry
Cash
Jimmy capital
Capital contributed
Jimmy
Cash
Steve capital
Capital contributed
Steve

Debit
$36,000

$54,000
$45,000

$45,000

2. Statement of financial position

Ming Chef Restaurant
Statement of Financial Position
Assets
Current asset

2014

Credit
$36,000

$54,000
$45,000

$45,000

Cash
Total assets
Equity
Kuang
Jerry
Jimmy
Steve
Total Equity

$180,000
$180,000
$36,000
$54,000
$45,000
$45,000
$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

RESTAURANT
AT THE END OF 30 SEPTEMBER 2015
Account name
Cash
Accounts Receivable
Inventory
Prepaid Insurance
Furniture

Debit
180,000
20,000
70,000
9,000
145,000

Credit

Accumulated Depreciation - Furniture

Equipment
Accumulated Depreciation - Equipment
Accounts Payable
Bank Loan
Capital-Kuang
Capital-Jerry
Capital-Jimmy
Capital-Steve
Drawings-Kuang
Drawings-Jerry
Drawings-Jimmy
Drawings-Steve
Service Revenue
Cost of Goods Sold
Rent
Wages
Insurance
Stationery
Depreciation
Water Expenses
Gas Expenses
Electricity Expenses
Advertising Expenses
Administrative Expenses
Other Expenses
TOTAL

10,000
142,000
12,000
23,500
40,000
100,000
150,000
125,000
125,000
35,000
45,000
37,000
32,000
349,500
60,000
30,000
15,000
6,000
1,000
8,000
20000
45000
35000
12000
10500
8000
935,000

935,000

MING CHEF RESTAURANT

Journal Entries to close income and expenses Accounts
Date

Particulars
Income summary

Debit ($)

Credit ($)

190500

Rent

30000

Wages

15000

Insurance

6000

Stationery

1000

Depreciation

8000

Water Expenses

20000

Gas Expenses

45000

Electricity Expenses

35000

Advertising Expenses

12000

Administrative Expenses

10500

Other Expenses

8000

Closing Expenses Summary

Service Revenue

349500

Income Summary

349500

Closing Revenue Account

JOURNAL ENTRY TO ALLOCATE PROFITS

Ming Chef Restaurant
Journal Entry to allocate profits
Date

Particulars
Income summary

Debit ($)

Credit ($)

99000

Kuang, current

19800

Jerry, current

29700

Jimmy, current

24750

Steve, current

24750

Profits allocated to partners

JOURNAL ENTRY OF PARTNERS DRAWINGS

Ming Chef Restaurant
Journal Entry of partners drawings

Date

Particulars
Current- Kuang

Debit ($)
35000

Drawing- Kuang
Current- Jerry

35000
45000

Drawing- Jerry
Current- Jimmy

45000
37000

Drawing- Jimmy
Current- Steve

Credit ($)

37000
32000

Drawing- Steve

32000

Drawing accounts closed

STATEMENT OF COMPREHENSIVE INCOME

Ming Chef Restaurant
Statement of comprehensive income
For the month ended 30 Sep
349500

Service Revenue
Cost of goods sold

60000

289500

Gross Profit

Expenses
Rent

30000

Insurance

15000

Stationery

1000

Depreciation

8000

Water Expenses

20000

Gas Expenses

45000

Electricity Expenses

35000

Advertising Expenses

12000

Administrative Expenses

10500

Wages

15000

Other Expenses

8000

190500

Total Expenses

Net Profit

99000

Allocation of profit
To Kuang

19800

To Jerry

29700

To Jimmy

24750

To Steve

24750

Total

99000

STATEMENT OF CHANGE IN EQUITY

Ming Chef Restaurant
Statement of changes in equity
For the month ended 30 Sep
PARTNER NAME
Current account at start

Kuang

Jerry

Jimmy

Steve

Add: Profit

19800

29700

24750

24750

Less: Drawing

35000

45000

37000

32000

Current account at end

-15200

-15300

-12250

-7250

Add: Fixed capital

100000

150000

125000

125000

84800

134700

112750

117750

Ending balance equity

Toatl Equity : 450,000

MING CHEF RESTAURANT

STATEMENT OF FINANCIAL POSITION AT 30 Sep
ASSETS

2015 ($)

Non- current assets

Furniture

135000

Equipment

130000

Current assets
Inventory
Cash

70000
180000

Prepaid insurance

9000

Accounts Receivable
Total Assets

20000
544000

Liabilities and Owners Equity

Current liability
Account payable

23500

Non- current liability

Bank Loan

40000

Total liability

63500

Owners Equity
Kuang

84800

Jerry

134700

Jimmy

112750

Steve

117750

Total Owners Equity

450000

Total liabilities and owners equity

513500

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 equity

Add: Evans investment
Total equity
Evans Capital
Bonus to existing partners
Bonus to Kuang
Bonus to Jerry
Bonus to Jimmy
Bonus to Steve

450,000
200,000
650,000
130,000
70,000
21,000
14,000
21,000
14,000

Journal Entry to admit Evan

Date
Nov 10

Income Summary
Kuang, current
Jerry, current
Jimmy, current
Steve, current
Evan, current

Particulars

Debit
200,000

Credit
21,000
14,000
21,000
14,000
130,000

Partnership Equity
Numb
er
1
2
3
4
5

Partner Name
Kuang
Jerry
Jimmy
Steve
Evan

Total partnership equity : 650,000

Equity
105,800
148,700
133,750
131,750
130,000