AA, BB and Cc are partners with average capital balances during 2021 of 360,000, 180,000 and 120,000 respectively. Partners receive 10% interest on their average capital balances. After deducting salaries of 90,000 to AA and 60,000 to CC the residual profit or loss is divided equally. In 2021, the partnership sustained a 99,000 loss before interest and salaries to partners. By what amount should AA’s capital account change? a. 21,000 increase b. 33,000 decrease c. 105,000 decrease d. 126,000 increase
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.
AA, BB and Cc are partners with average capital balances during 2021 of 360,000, 180,000 and
120,000 respectively. Partners receive 10% interest on their average capital balances. After deducting
salaries of 90,000 to AA and 60,000 to CC the residual profit or loss is divided equally. In 2021, the
partnership sustained a 99,000 loss before interest and salaries to partners. By what amount should
AA’s capital account change?
a. 21,000 increase
b. 33,000 decrease
c. 105,000 decrease
d. 126,000 increase
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