Rajan, Rashmi and Richa are partners. The partnership agreement provides that partners will receive interest of 8% of their average capital balance and a salary allowance as follows: Rajan $50,000 Rashmi $40,000 Richa $40,000 Rajan, who manages the business, will receive a bonus of 25% of the profit in excess of $90 000 after partners’ interest and salary allowances have been deducted. Residual profits will be divided: Rajan ½ (half) Rashmi 1/3 (one third) Richa 1/6 (one sixth) During the current year their average capital balances were as follows: Rajan $250,000 Rashmi $150,000 Richa $90,000 Required Prepare a schedule showing how profit will be divided among the three partners if the profit for the year before the adjustment is $320,000.
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.
Rajan, Rashmi and Richa are partners. The partnership agreement provides that partners will receive interest of 8% of their average capital balance and a salary allowance as follows:
Rajan $50,000
Rashmi $40,000
Richa $40,000
Rajan, who manages the business, will receive a bonus of 25% of the profit in excess of $90 000 after partners’ interest and salary allowances have been deducted.
Residual profits will be divided:
Rajan ½ (half)
Rashmi 1/3 (one third)
Richa 1/6 (one sixth)
During the current year their average capital balances were as follows:
Rajan $250,000
Rashmi $150,000
Richa $90,000
Required
Prepare a schedule showing how profit will be divided among the three partners if the profit for the year before the adjustment is $320,000.
Partnership is a form of business in which two or more persons come together to form a common entity. Such entity is known as a partnership firm. Partnership can be of following types:
- Limited Liability Partnership
- Unlimited Partnership
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