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Partnership Operations

The document describes different methods for dividing partnership profits between two partners, Siy and Tiu, based on their capital contributions and agreements. In 2016, the partnership earned a profit of P60,000. It provides examples of dividing the profits equally, based on an agreed percentage split of 60% for Siy and 40% for Tiu, and based on the partners' original, beginning, ending or average capital balances. The final example divides the profits by providing 12% interest on average capital balances, and splitting the remainder equally.

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Nerish Plaza
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158 views

Partnership Operations

The document describes different methods for dividing partnership profits between two partners, Siy and Tiu, based on their capital contributions and agreements. In 2016, the partnership earned a profit of P60,000. It provides examples of dividing the profits equally, based on an agreed percentage split of 60% for Siy and 40% for Tiu, and based on the partners' original, beginning, ending or average capital balances. The final example divides the profits by providing 12% interest on average capital balances, and splitting the remainder equally.

Uploaded by

Nerish Plaza
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 XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 8

Assume that on January 1, 2016, Siy and Tiu formed a partnership with an

investment of P40,000 by Siy and P60,000 by Tiu. On December 31, 2016, after
closing all income and expense accounts, the Income Summary account shows a
credit balance of P60,000, representing the profit for the year 2016.

Division of Profit and Loss Equally

Income Summary 60,000.00


Siy, Capital 30,000.00
Tiu, Capital 30,000.00

Siy: 60,000/2 30,000.00


Tiu: 60,000/2 30,000.00
Total 60,000.00

Assume that Siy and Tiu agreed to divide profits and losses in the ratio of 60%
to Siy and 40% to Tiu. The agreement that Siy should receive 60% of the net
income (perhaps because of greater experience and expertise in the field or
various business contacts) would cause Siy to shoulder a larger share of the net
loss if the partnership operated unprofitable.

Income Summary 60,000.00


Siy, Capital 36,000.00
Tiu, Capital 24,000.00

Siy: 60%*60,000 36,000.00


Tiu: 40%*60,000 24,000.00
Total 60,000.00

Divide the profits and losses according to their original capital contributions.

Income Summary 60,000.00


Siy, Capital 24,000.00
Tiu, Capital 36,000.00

Siy: (40/100)*60,000 24,000.00


Tiu: (60/100)*60,000 36,000.00
Total 60,000.00

Divide the profits and losses according to their beginning capital balances.

Income Summary 60,000.00


Siy, Capital 24,000.00
Tiu, Capital 36,000.00

Siy: (40/100)*60,000 24,000.00


Tiu: (60/100)*60,000 36,000.00
Total 60,000.00

Divide the profits and losses according to their ending capital balances.

Income Summary 60,000.00


Siy, Capital 22,500.00
Tiu, Capital 37,500.00

Siy: (60/160)*60,000 22,500.00


Tiu: (100/160)*60,000 37,500.00
Total 60,000.00

Divide the profits and losses according to their average capital balances.

Simple Average

Income Summary 60,000.00


Siy, Capital 23,077.00
Tiu, Capital 36,923.00

Siy: (40,000+60,000)/2 50,000.00


Tiu: (60,000+100,000)/2 80,000.00
Average Capital Balances 130,000.00

Siy: (50/130)*60,000 23,077.00


Tiu: (80/130)*60,000 36,923.00
Total 60,000.00

Peso-Month/Peso-Day Method

Income Summary 60,000.00


Siy, Capital 21,176.00
Tiu, Capital 38,824.00

Siy: (60/170)*60,000 21,176.00


Tiu: (110/170)*60,000 38,824.00
Total 60,000.00
Again, refer to Siy and Tiu Partnership with a net income of P60,000 for 2016
and capital account balances as shown in illustration 2-1. Assume that the
partnership agreement allows interest on partners’ average capital account
balances at 12%, with any remaining net income or loss to be divided equally.

Income Summary 60,000.00


Siy, Capital 27,000.00
Tiu, Capital 33,000.00
Siy Tiu
Capital balances, Jan. 1 40,000.00 60,000.00
Additional investment, Mar. 1 20,000.00 50,000.00
Additional investment, Aug. 1 20,000.00 40,000.00
Withdrawal, Oct. 1 - 20,000.00 -
Withdrawal, Nov. 1 - - 50,000.00
Capital balances,Dec. 31 60,000.00 100,000.00
Investments /
Date (Withdrawals) Capital Account Balance
Siy, Capital
Jan. 1 40,000.00 40,000.00
Mar. 1 20,000.00 60,000.00
Aug. 1 20,000.00 80,000.00
Oct. 1 - 20,000.00 60,000.00

Tiu Capital
Jan. 1 60,000.00 60,000.00
Mar. 1 50,000.00 110,000.00
Aug. 1 40,000.00 150,000.00
Nov. 1 - 50,000.00 100,000.00
Total Average Capital Balance

Siy Tiu
Interest on capital balances:
Siy: 60,000*12% 7,200.00
Tiu: 110,000*12% 13,200.00
Remainder:
39600/2 19,800.00 19,800.00
Total Share in Income 27,000.00 33,000.00
Average Capital
Fraction Balance

1/6 6,666.67
5/12 25,000.00
1/6 13,333.33
1/4 15,000.00
60,000.00

1/6 10,000.00
5/12 45,833.33
1/4 37,500.00
1/6 16,666.67
110,000.00
170,000.00

Total

7,200.00
13,200.00

39,600.00
60,000.00

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