Allocation of profit and loss to partners: Allocation of profit and loss to partners will be in accordance with partnership agreement. If the entity does not have formal partnership agreement, section 401 of the UPA 1997 indicates that profit and losses are distributed equally among partners. Profit distributions are not included in the partnership’s income statement, but recorded directly into partner’s capital accounts, not treated as expense items. Interest on capital balances: the interest on capital is credited to partners’ capital balances as part of profit distribution. In this situation average capital balance is determined based on which interest is calculated. The rate of interest is often stated in partnership agreement, but some time partnerships use a rate determined by reference to current U.S. Treasury rates or current money market rates. The choices of capital balances available to be used for interest on capital allocation.

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Chapter 15, Problem 15.7Q

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Allocation of profit and loss to partners:Allocation of profit and loss to partners will be in accordance with partnership agreement. If the entity does not have formal partnership agreement, section 401 of the UPA 1997 indicates that profit and losses are distributed equally among partners. Profit distributions are not included in the partnership’s income statement, but recorded directly into partner’s capital accounts, not treated as expense items.

Interest on capital balances: the interest on capital is credited to partners’ capital balances as part of profit distribution. In this situation average capital balance is determined based on which interest is calculated. The rate of interest is often stated in partnership agreement, but some time partnerships use a rate determined by reference to current U.S. Treasury rates or current money market rates.

The choices of capital balances available to be used for interest on capital allocation.

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