Partnership and Corporation
Partnership and Corporation
Partnership and Corporation
10, 2020
Partnership
Accounting
ANJIELICA M. CAVENTA, CPA
Youth on the Rock Partnership Accounting (Part 2)
Reminders
1. Non-cash assets contributed are recorded in the
books at their agreed values or fair market value at
the time of contribution.
2. No Accumulated Depreciation is recorded in the
partnership books.
3. The Allowance for Uncollectible Accounts is carried
in the partnership because of the possibility of
collection.
Partnership Loss
Juan, Capital 240,000
Cruz, Capital 240,000
Income Summary 480,000
AMOUNT OF CAPITAL
CONTRIBUTED
Interest on capital contribution is allowed to each partner.
ENTREPRENUERIAL ABILITY
Bonus is allowed to partners when the partnership realizes
profits.
Youth
Youth on Rock
on the the Rock Partnership
Partnership Accounting
Accounting (Part(Part
2) 2)
Division of Profits and
Losses
The profit or loss division of the partners
may be expressed in terms of:
Percentage
Fraction
Decimal
Ratio
Youth
Youth on Rock
on the the Rock Partnership
Partnership Accounting
Accounting (Part(Part
2) 2)
ILLUSTRATION
Chan and Cristine are partners sharing profits and losses based on their capital
contributions of P600,000 and P400,000, respectively.
Their profit and loss sharing can be expressed as follows:
Division of Losses
1. In accordance with agreement
2. If only the division of profits is agreed upon,
division of losses will follow the same proportion
3. In accordance with capital contribution
Youth
Youthon
onthe
theRock
RockPartnership
PartnershipAccounting
Accounting(Part
(Part2)2)
RULES FOR DIVIDING PROFITS AND LOSSES
AS TO INDUSTRIAL
PARTNERS
Division of Profits
1. In accordance with agreement
2. In the absence of agreement:
a. Industrial partner – Just and equitable share of
the profits
b. Capitalist partner – In accordance with capital
contribution
Youth
Youthon
onthe
theRock
RockPartnership
PartnershipAccounting
Accounting(Part
(Part2)2)
RULES FOR DIVIDING PROFITS AND LOSSES
AS TO INDUSTRIAL
PARTNERS
Division of Losses
1. In accordance with agreement
2. In the absence of agreement:
Capitalist-industrial partner
a. No share in losses as an industrial partner
b. Share in proportion to capital contribution as a
capitalist partner.
Youth
Youthon
onthe
theRock
RockPartnership
PartnershipAccounting
Accounting(Part
(Part2)2)
METHODS OF DISTRIBUTING PROFITS BASED ON
PARTNERS’ AGREEMENT
Equally
Bonus to
managing Arbitrary ratio
partner
Salary
allowances to Capital Ratio
partners
Interest on
Capital
Youth
Youthon
onthe
theRock
RockPartnership
PartnershipAccounting
Accounting(Part
(Part2)2)
KNOWLEDGE QUIZ
TRUE
FALSE
a. The bonus is based on profit AFTER deduction for bonus but BEFORE deduction
of income tax
B = .20(P685,714 – B)
B = P137,143 - .20B
B + .20B = P137,143
1.20B = P137,143
B = P137,143 ÷ 1.20
B = P114,286
b. The bonus is based on profit BEFORE deduction for bonus but AFTER deduction
of income tax
B = .20(P685,714 - T)
T = .30 (P685,714)
T = P205,714
B = .20(P685,714 - P205,714)
B = .20(P480,000)
B = P96,000
c. The bonus is based on profit AFTER deduction for bonus and income tax
B = .20(P685,714 – B - T)
B = .20(P685,714 – B - P205,714)
B = .20(480,000 – B)
B = P96,000 - .20B
B + .20B = P96,000
1.20B = P96,000
B = P96,000 ÷ 1.20
B = P80,000
Youth on the Rock Partnership Accounting (Part 2)
ORDER OF PROFIT
SHARING PROVISION