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Business Accounting Connect Access Card for Financial Accounting: Information and Decisions

Partnership is a form of business between two or more individuals who share work and profit. It is a legal relationship formed by the agreement. Each partner is responsible for each other's decisions. There is an agreed ratio between partners in which they share profit and losses. To Explain: Treatment of amount receives by partner at the time of retirement which is greater than his equity. When a partner withdraws higher than the value of equity at the time of exit, it means capital gain in assets and partner receives a bonus. Remaining partners decrease the equity value by the same amount of bonus. The remaining partners will reduce the equities or capital according to their profit-sharing ratio. Profit or loss sharing after deductions falls under income and losses. So, it will be made in the profit and loss sharing ratio.

Partnership is a form of business between two or more individuals who share work and profit. It is a legal relationship formed by the agreement. Each partner is responsible for each other's decisions. There is an agreed ratio between partners in which they share profit and losses. To Explain: Treatment of amount receives by partner at the time of retirement which is greater than his equity. When a partner withdraws higher than the value of equity at the time of exit, it means capital gain in assets and partner receives a bonus. Remaining partners decrease the equity value by the same amount of bonus. The remaining partners will reduce the equities or capital according to their profit-sharing ratio. Profit or loss sharing after deductions falls under income and losses. So, it will be made in the profit and loss sharing ratio.

Solution Summary: The author explains that partnership is a legal relationship between two or more individuals who share work and profit. Each partner is responsible for each other's decisions.

Connect Access Card for Financial Accounting: Information and Decisions

Connect Access Card for Financial Accounting: Information and Decisions

8th Edition

ISBN: 9781259662966

Author: John J Wild

Publisher: McGraw-Hill Education

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