Concept explainers
a.
Allocation of
Partner’s capital account:the balance in capital account represents the partner’s share of partnership’s net assets. A partners initial investment and any subsequent capital contributions, share of profits and any withdrawals of capital are recorded in partner’s capital account. Each partner has one capital account, which usually has a credit balance, but may have a debit balance because partner’s share of loss and withdrawals exceeds the capital contribution and share in profits. A deficiency is usually eliminated by additional capital contributions.
The preparation of income distribution schedule.
b.
Allocation of profit and loss to partners: Allocation of profit and loss to partners will be in accordance with partnership agreement. If the entity does not have formal partnership agreement, section 401 of the UPA 1997 indicates that profit and losses are distributed equally among partners. Profit distributions are not included in the partnership’s income statement, but recorded directly into partner’s capital accounts, not treated as expense items.
Partner’s capital account: the balance in capital account represents the partner’s share of partnership’s net assets. A partners initial investment and any subsequent capital contributions, share of profits and any withdrawals of capital are recorded in partner’s capital account. Each partner has one capital account, which usually has a credit balance, but may have a debit balance because partner’s share of loss and withdrawals exceeds the capital contribution and share in profits. A deficiency is usually eliminated by additional capital contributions.
The preparation statement of partner’s capital.
c.
Allocation of profit and loss to partners: Allocation of profit and loss to partners will be in accordance with partnership agreement. If the entity does not have formal partnership agreement, section 401 of the UPA 1997 indicates that profit and losses are distributed equally among partners. Profit distributions are not included in the partnership’s income statement, but recorded directly into partner’s capital accounts, not treated as expense items.
Partner’s capital account: the balance in capital account represents the partner’s share of partnership’s net assets. A partners initial investment and any subsequent capital contributions, share of profits and any withdrawals of capital are recorded in partner’s capital account. Each partner has one capital account, which usually has a credit balance, but may have a debit balance because partner’s share of loss and withdrawals exceeds the capital contribution and share in profits. A deficiency is usually eliminated by additional capital contributions.
The preparation of income distribution schedule where salaries for A is $30,000 and J is $35,000
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Advanced Financial Accounting
- The partnership of Tatum and Brook shares profits and losses in a 60:40 ratio respectively after Tatum receives a 10,000 salary and Brook receives a 15,000 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is: A. $40,000 B. $25,000 C. ($5,000) In addition, show the resulting entries to each partners capital account. Tatums capital account balance is $50,000 and Brooks is $60,000.arrow_forwardThe partnership of Magda and Sue shares profits and losses in a 50:50 ratio after Mary receives a $7,000 salary and Sue receives a $6,500 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is: A. $10,000 B. $5,000 C. ($12,000) In addition, show the resulting entries to each partners capital account.arrow_forward
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