Watts and Lyon are forming a partnership. Watts Invests $40,500 and Lyon Invests $49,500. The partners agree that Watts will work one-fourth of the total time devoted to the partnership and Lyon will work three-fourths. They have discussed the following alternative plans for sharing Income and loss: (0) In the ratio of their Initial capital investments; (b) In proportion to the time devoted to the business; (c) a salary allowance of $21,000 per year to Lyon and the remaining balance in accordance with the ratlo of thelr Initial capital Investments; or (d) a salary allowance of $21,000 per year to Lyon, 9% Interest on their initial capital Ivestments, and the remaining balance shared equally. The portners expect the business to perform as follows: Year 1, $15,000 net loss; Year 2, $37,500 net Income; and Year 3, $62,500 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.
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