The partnership agreement of A, B and C stipulates the following: Partners A and C shall receive annual salaries of 12,000 and ₱ 8,000, respectively. A bonus of 10% of profit after salaries but before deduction of bonus shall be given to Partner A, the managing partner. (Deduct the salaries to the profit, as basis for computation) Each partner shall receive 10% interest on average capital investments. Any remaining profit or loss shall be shared as follows: 40% to A and 30% each to B and C. The average capital investments of partners during the year are as follows: A ₱100,000 B 60,000 C 120,000 The partnership earns profit of ₱100,000. Requirement: Compute and explain for the respective shares of the partners on the partnership profit.
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.
- Partners A and C shall receive annual salaries of 12,000 and ₱ 8,000, respectively.
- A bonus of 10% of profit after salaries but before deduction of bonus shall be given to Partner A, the managing partner. (Deduct the salaries to the profit, as basis for computation)
- Each partner shall receive 10% interest on average capital investments.
- Any remaining profit or loss shall be shared as follows: 40% to A and 30% each to B and C.
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