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Partnership Operations

The document discusses how profits and losses are divided in a partnership. It states that profits and losses will be divided according to the partners' agreement, or if no agreement, according to their original capital contributions. It also lists five methods for dividing profits and losses: equally, in an unequal ratio, based on capital account balances, allowing interest on capital accounts, or allowing salaries before dividing the remainder.

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Trisha Mae Alburo
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122 views21 pages

Partnership Operations

The document discusses how profits and losses are divided in a partnership. It states that profits and losses will be divided according to the partners' agreement, or if no agreement, according to their original capital contributions. It also lists five methods for dividing profits and losses: equally, in an unequal ratio, based on capital account balances, allowing interest on capital accounts, or allowing salaries before dividing the remainder.

Uploaded by

Trisha Mae Alburo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Partnership

Operations

Advance Accounting
Division of Profits and Losses
- The partnership law provides that profits and losses
of the partnership are to be divided in accordance with
the partners’ agreement.

- If no agreement is made between and among the


partners, profits and losses are to be divided according
to their original capital contributions.
Division of Profits and Losses
- Should the partners agree to divide the profits only,
losses, if any are to be divided in the same manner as
that of dividing profits.

- Should the partners agree to divide losses only,


profits, if any shall be divided by the partners
according to their original capital contributions.
Methods of Dividing
Profits and Losses
The ratio in which partnership profits and losses are
divided is known as the profit and loss ratio. The
many possible methods of dividing net income or loss
among partners may be summarized as follows:
1. Equally
2. In an unequal or arbitrary ratio
3. In the ratio of partners’ capital account balances on
a particular date, or in the ratio of average capital
account balances during the year
Methods of Dividing
Profits and Losses
4. Allowing interest on partners’ capital account
balances and dividing the remaining net income or
loss in a specified ratio
5. Allowing salaries to partners and dividing the
remaining net income or loss in a specified ratio
6. Bonus to managing partner based on net income
Capital Balance on December 31
Capital Balance, January 1 xx
Investments xx
Withdrawals (xx)
Share in Profit/(Loss) xx/(xx)
Capital Balance, December 31 xx

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