Answered: They share profits and losses in a…

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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Bill, Bob, and Bo, are partners in the Trendy Company, a retailer of inexpensive kids' wear. They share profits and losses in a 1:4:5 ratio and have decided to expand their business territory. They have agreed to admit Burt to the partnership for a cash Investment. Their capital balances are currently P60,000, P100,000, and P140,000, respectively. Assuming Burt contributes P80,000 for a 20% interest, the entry to record his investment in the partnership includes a: a. credit to Burt, capital for P76,000 b. debit to Bill, capital for P2,000 c. debit to Bob, capital for P8,000 d. credit to Bo, capital, for P10,000

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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