Answered: Love and Faith have been operating an…

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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Love and Faith have been operating an accounting firm as partners for a number of years and at the beginning of 2016, their capital balances were P120,000 and P150,000, respectively. During 2019, Love invested an additional P20,000 on April 1 and withdrew P12,000 on August 30. Faith withdrew P24,000 on May 1 and invested P10,000 on November 1. In addition, Love and Faith withdrew their salary allowances of P36,000 and P42,000, respectively. At year-end 2016 total capital of the Love and Faith partnership was P360,000. Love and Faith share income after salary allowances in a ratio of 55:45. The share of Love on the 2019 net income is

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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