R and M are partners in a firm sharing profits equally. Their capital accounts as of December 31, 2017 showed balances of P60,000 and P50,000, respectively. Each partner also contributed P10,000 each. The profits of the year 2017 amounted to P20,000, and the division of profits is as follows: The partners were entitled to interest on capitals at 6% based on beginning capital. The drawings of R and M for the year 2017 were P8,000 and P6,000, respectively. The interest on drawings was also to be charged at 2.5% p.a. R was entitled to salary of P5,000 and M, a salary of P2,000 for the whole year. The remaining balances are divided equally. It was decided to make the necessary adjustments to record the above omissions. solve for the share in net income of M.
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.
R and M are partners in a firm sharing profits equally. Their capital accounts as of December 31, 2017 showed balances of P60,000 and P50,000, respectively. Each partner also contributed P10,000 each. The profits of the year 2017 amounted to P20,000, and the division of profits is as follows:
- The partners were entitled to interest on capitals at 6% based on beginning capital.
- The drawings of R and M for the year 2017 were P8,000 and P6,000, respectively. The interest on drawings was also to be charged at 2.5% p.a.
- R was entitled to salary of P5,000 and M, a salary of P2,000 for the whole year.
- The remaining balances are divided equally.
It was decided to make the necessary adjustments to record the above omissions. solve for the share in net income of M.
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