Answered: Amy and Carmela are partners who share…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Amy and Carmela are partners who share profits and losses after salary and interest allowances in the ratio of 60:40, respectively. Amy’s salary is P20,000 and Carmela’s is P10,000. The partners are also paid interest on their average capital balances. In 2008, Amy received P10,000 in interest and Carmela P4,000. If Carmela’s share of partnership income was P40,000 in 2008, what was the total partnership income?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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