Allocation of
Interest on capital balances: the interest on capital is credited to partners’ capital balances as part of profit distribution. In this situation average capital balance is determined based on which interest is calculated. The rate of interest is often stated in partnership agreement, but some time partnerships use a rate determined by reference to current U.S. Treasury rates or current
The choices of capital balances available to be used for interest on capital allocation.
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ADVANCED FINANCIAL ACCOUNTING IA
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- Questions: What are the rules in distributing profits and losses? Is it valid to exclude a partner in the distribution of losses? Why? Why not?arrow_forwardIn the absence of agreement as to distribution of profit, how shall the partnership profit be distributed to the partners? A. The industrial partner shall receive a share equivalent to the least share of a capitalist partner while the capitalist partners shall share based on capital contribution ratio. B. The industrial partner shall receive a just and equitable share and the remainder shall be distributed to the capitalist partners on the basis of capital contribution ratio. C. The profit shall be distributed on the basis of loss contribution ratio which may have been agreed upon by the partners. D. The profit shall be distributed equally to all partners including the industrial partner.arrow_forwardWhat are the rights of the limited partner as to the contribution of profits? Article 1856.arrow_forward
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