Barbie, Capital January 1 Balance May P210,000 90,000 P 60,000 1 Investment October 1 Withdrawal Carla, Capital January 1 Balance October 1 Withdrawal P150,000 P30,000 The partnership profit for the year ended December 31, 2014 is P300,000. Instructions: Give the journal entries to record the transfer of profit to the capital accounts under each of the following assumptions: (Show the necessary computations after the journal entries as an explanation for each entry). 1. Profit is divided 60% to Carla and 40% to Barbie. 2. Profit is divided in the ratio of capital balances at the beginning of the period. 3. Profit is divided in the ratio of average capital. 4. Interest at 10% is allowed on average capital and the balance of profit is divided in the ratio of 40% and 60% for Barbie and Carla respectively.
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.
Step by step
Solved in 5 steps with 5 images