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

Partnership contract is also called as partnership agreement. This agreement contains all the written terms and conditions for the partnership. The agreement specifies the duration of the partnership, profit sharing ratio, and provisions for admission/retirement/ death of the partners etc. To discuss: if the statement of the partner is correct. A partnership agreement provides for the profits sharing ratio between the partners. The word “profit” includes the negative profit or losses as well. Hence the profit sharing ratio is applied both in case of profits as well as in case of losses. However the partnership agreement may provide for separate ratios for sharing profit and losses. In the given case the partnership agreement has not provided two ratios and a single profit sharing ratio is provided. Hence the partner is not correct in applying different ratio for sharing losses of the partnership.

Partnership contract is also called as partnership agreement. This agreement contains all the written terms and conditions for the partnership. The agreement specifies the duration of the partnership, profit sharing ratio, and provisions for admission/retirement/ death of the partners etc. To discuss: if the statement of the partner is correct. A partnership agreement provides for the profits sharing ratio between the partners. The word “profit” includes the negative profit or losses as well. Hence the profit sharing ratio is applied both in case of profits as well as in case of losses. However the partnership agreement may provide for separate ratios for sharing profit and losses. In the given case the partnership agreement has not provided two ratios and a single profit sharing ratio is provided. Hence the partner is not correct in applying different ratio for sharing losses of the partnership.

Solution Summary: The author explains that a partnership agreement specifies the duration of the partnership, profit sharing ratio, and provisions for admission/retirement/death.

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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