Accounting Questions and Answers

Issue of shares at premium means that the issuing of shares above the face value (also called as nominal value or par value). Simply put, when shares are issued at a price higher than the face value, it is said to be issued at a premium.

Charging interest on drawings is a means of discouraging partners from withdrawing excessive amounts from the business. From this, it follows that interest on drawings is a debit entry in the partners' current accounts and a credit entry in the Appropriation Account.

A partnership deed, also known as a partnership agreement, is a document that outlines in detail the rights and responsibilities of all parties to a business operation. It has the force of law and is designed to guide the partners in the conduct of the business.

Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable.

Prime cost is the direct cost of a commodity in terms of the materials and labour involved in its production, excluding fixed costs. Direct material and direct labor costs are prime cost because they are the main incremental costs of a product.