On January 1, 2019, David and Enrile decided to form partnership. At the end of the year, the partnership made a net income of 120,000. The capital accounts of the partnership show the following transactions: David, Capital Debit Credit January 1 - 40,000 April 1 5,000 - August 1 - 10,000 October 1 - 5,000 December 1 - 4,000 Enrile, Capital Debit Credit January 1 - 25,000 June 1 - 10,000 September1 3,000 - October 1 1,000 - December 1 - 5,000 Assuming an interest of 20% is given on the average capital balance and the balance of the profits is divided equally, compute for each partner’s share in the net income.
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.
- On January 1, 2019, David and Enrile decided to form
partnership . At the end of the year, the partnership made a net income of 120,000. The capital accounts of the partnership show the following transactions:
|
David, Capital |
||
|
|
Debit |
Credit |
|
January 1 |
- |
40,000 |
|
April 1 |
5,000 |
- |
|
August 1 |
- |
10,000 |
|
October 1 |
- |
5,000 |
|
December 1 |
- |
4,000 |
|
Enrile, Capital |
||
|
|
Debit |
Credit |
|
January 1 |
- |
25,000 |
|
June 1 |
- |
10,000 |
|
September1 |
3,000 |
- |
|
October 1 |
1,000 |
- |
|
December 1 |
- |
5,000 |
Assuming an interest of 20% is given on the average capital balance and the balance of the profits is divided equally, compute for each partner’s share in the net income.
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