Determine the distribution of the partnership net income under each of the following assumptions: Net income is divided based on the ending capital ratio inclusive of the drawing accounts. Interest of 12% is allowed on the average capital including the temporary changes therein and the balance is to be divided in the ratio of 3:4:3 between Benito, Carlos and Donato, respectively. Postings to the capital accounts during the first fifteen days of the month are to be considered as of the first day of the month and postings during the second half of the month are to be considered as of the end of the month. How much will be the share of each of the partners in a net loss of P500 in Nos. 1 and 2 above.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Exercise 4: Division of Income
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Instructions:
- Determine the distribution of the partnership net income under each of the following assumptions:
- Net income is divided based on the ending capital ratio inclusive of the drawing accounts.
- Interest of 12% is allowed on the average capital including the temporary changes therein and the balance is to be divided in the ratio of 3:4:3 between Benito, Carlos and Donato, respectively. Postings to the capital accounts during the first fifteen days of the month are to be considered as of the first day of the month and postings during the second half of the month are to be considered as of the end of the month.
- How much will be the share of each of the partners in a net loss of P500 in Nos. 1 and 2 above.
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