Partnership
Operations
Division of profits and
losses
• The partners shall share in the
profits or losses of a partnership in
accordance with the partnership
agreement.
Division of profits and
losses (Continuation)
• If only the share of each partner in the profits has
been agreed upon, the share of each in the losses shall
be in the same proportion.
• In the absence of stipulation, the share of each
partner in the profits and losses shall be in
proportion to what he may have contributed, but
the industrial partner shall not be liable for the
LOSSES. (Art. 1797 of the Philippine Civil Code)
• The designation of profits and losses cannot be
entrusted to one of the partners (Art. 1798).
• A stipulation which excludes one or more partners
from any share in the profits or losses is VOID.
Other stipulations that
affect division of P/L
1. Salaries – normally, an industrial partner shall receive salary,
in addition to his share in the partnership’s profits, as
compensation for his services to the partnership.
2. Bonuses – the partnership agreement may stipulate a bonus to
be given to a managing partner to encourage excellent
management performance. Unlike for salaries though, a partner
is entitled to a bonus only if the partnership earns profit.
3. Interest on capital contributions – the partnership agreement
may stipulate that each partner may be entitled to a per annum
interest computed on his capital contributions.
The above-mentioned items are normally provided first to the
respective partners and any remaining amount of the profit or loss is
shared based on the stipulated profit or loss ratio.
Problems:
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 1: With remaining profit.
The partners share profits equally and
losses on a 60:40 ratio. The partnership
earned profit of P100,000 before salary
allowances.
Requirements:
1. Compute for the respective shares of
the partners in the profit.
2. Provide the journal entries
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 2: With remaining profit with salary
The partners share profits equally and losses on a
60:40 ratio. An annual salary allowance of
P30,000 to A. The partnership earned profit of
P100,000 before salary allowances.
Requirements:
1. Compute for the respective shares of the
partners in the profit.
2. Provide the journal entries
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 3: With Loss and with salary
The partners share profits equally and losses
on a 60:40 ratio. An annual salary allowance
of P50,000 to A. The partnership incurred a
loss of (P30,000) before salary allowances.
Requirements:
1. Compute for the respective shares of the
partners in the profit.
2. Provide the journal entries
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 4: No P/L ratio
The partners contribution were as follows, A
amounting to P100,000 and B amounting to
P200,000. The partnership earned profit of
P100,000 before salary allowances.
Requirements:
1. Compute for the respective shares of the
partners in the profit.
2. Provide the journal entries
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 5: With Salary and Bonus
• The partners agreed to share profits and losses in
the ratio of 60:40. Salaries to partner A = P10,000
and B = P5,000. Bonus to A of 10% of the profit after
salaries but before bonus. The partnership earned
profit of P100,000 before salary allowances.
Requirements:
1. Compute for the respective shares of the partners
in the profit.
2. Provide the journal entries
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 6: With Salary and Bonus (after bonus)
The partners agreed to share profits and losses in
the ratio of 60:40. Salaries to partner A = P10,000
and B = P5,000. Bonus to A of 10% of the profit
after salaries and bonus. The partnership earned
profit of P100,000 before salary allowances.
Requirements:
1. Compute for the respective shares of the
partners in the profit.
2. Provide the journal entries
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 7: Bonus with limit
• A shall receive 10% bonus of the profit up to P100,000
and 20% over P100,000.
• B shall receive 5% bonus of the remaining profit over
P150,000.
• The remainder shall be divided equally. The
partnership earned profit of P280,000.
Requirements:
1. Compute for the respective shares of the partners
in the profit.
2. Provide the journal entries
A and B formed a partnership. The partnership
agreement stipulates the following:
CASE 8: Interest on capital
• Annual salary allowance of P100,000 for A, the managing
partner.
• Interest of 10% on the weighted average capital balance of B.
• The partners P/L ratio is 60:40
• The profit earned was P500,000.
Requirements:
1. Compute for the respective shares of the partners in the
profit.
2. Provide the journal entries
CASE 9: Reconstruction of information
• Partner A has 25% participation in the
profits of a partnership. During the year,
A’s capital account has a net increase of
P10,000. Partner A made contributions of
P40,000 and capital withdrawals of
P60,000 during the year.
Requirements:
1. How much profit did the partnership
earn during the year?
A and B formed a partnership. The
partnership agreement stipulates the
following:
CASE 10: Reconstruction of information
• Annual salary of P100,000 for A as managing
partner.
• The partners share profits and losses on 60:40.
Requirements:
1. If A’s share in the partnership’s profit was
P340,000, how much was the share of B?
SAMPLE PROBLEM
ACTUAL CPA BOARD
EXAM QUESTIONS
