1. Partnership : Partnership is an agreement between two or more persons for doing a business and sharing the profit from that business. The persons or parties of the partnership are known as partners and the agreement which is made for such partnership is called partnership deed. The partners share the profit and loss of the operating business as per the agreement made before entering the partnership. To determine: The calculation of income allocation to the partners for the current month using original agreement. Calculation of income allocation to the partners as per original agreement is as follows: Particulars M O C Total Salary allowance $3,000 $3,000 $3,000 $9,000 Additional income-Patients charges (Note 1) $4,100 $12,300 $24,600 $41,000 Total income $7,100 $15,300 $27,600 $50,000 Note 1: Calculation of amount of additional income Particulars M O C Group income for the month excluding salary allowance $41,000 $41,000 $41,000 Additional income-Patients charges 10% 30% 60% Amount of additional income as per agreement $4,100 $12,300 $24,600 2. Partnership: Partnership is an agreement between two or more persons for doing a business and sharing the profit from that business. The persons or parties of the partnership are known as partners and the agreement which is made for such partnership is called partnership deed. The partners share the profit and loss of the operating business as per the agreement made before entering the partnership. To determine: The calculation of income allocation to the partners for the current month using C’s proposal. Calculation of income allocation to the partners as per original agreement is as follows: Particulars M O C Group income for the month including salary allowance $50,000 $50,000 $50,000 Additional income-Patients charges 10% 30% 60% Amount of income as per C's proposal $5,000 $15,000 $30,000 3. Partnership: Partnership is an agreement between two or more persons for doing a business and sharing the profit from that business. The persons or parties of the partnership are known as partners and the agreement which is made for such partnership is called partnership deed. The partners share the profit and loss of the operating business as per the agreement made before entering the partnership. To determine: The ethical components of this partnership decision of the doctors. As per given data, M, O and C are doctors and doing the business in partnership. M and O are the physician while C is the surgeon. As per their agreement, they have to share the profit and loss as two-part formula. First they will receive the salary allowance of $3000 per month and secondly, addition income as per percentage of patients charges. This agreement is made ethically as they get their percentage of patient’s charges as per their work done. Now C wants to change the profit sharing ratio and wants the income as splitting the entire income on patient charges and this seems to be self-serving because C has larger patients as compared to M and O. Even M and O are referring their patients to C as he is the surgeon so they must get their commission for that. Therefore, the profit sharing as per agreement is correct and ethical otherwise they should agree on the proposal of C only if M and O get their referral commission income from C.

8th Edition

ISBN: 9781259662966

Author: John J Wild

Publisher: McGraw-Hill Education

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