1. Prepare a Schedule for Profit Distribution. 2. Journal entry to record the distribution of profit to partners.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
The following are the partnership agreement between partners Baby Love & Honey Sweet for their partnership’s
profit distribution:
A. Each partners shall be entitled for an annual salary of P50,000 each.
B. 15% Bonus of partnership profits after salaries to Honey Sweet being a managing partner.
C. 20% interest is given to both partners based on average capital ratio.
D. Residual
The ledgers of their capital balances are shown below:
Baby Love
Debit: July 1. P20,000
Credit: Jan 1. P80,000
Oct 1. P40,000
Honey Sweet
Debit: Oct 1. P10,000
Credit: Jan 1. P120,000
May 1. 30,000
The partnership profit for the year is P150,000 before distribution to partners
Required:
1. Prepare a Schedule for Profit Distribution.
2.
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