Answered: Kwaku and Ekua are in partnership…

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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Kwaku and Ekua are in partnership sharing profit the ratio 3:2. The net profit for the period was $12,000. Ekua is to receive an annual salary of $2000. there were no drawings during the year and the partners do not provide interest on capital account balances. What will be Kwaku's share of profit?

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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Partnership characteristics includes:

Sharing of profits and losses
Mutual agency
Unlimited liability
Lawful business
Contractual relationship

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