PARTNERSHIP OPERATIONS

Same principle ng recognition ng revenues at expenses nag-aapply sa partnerhip,

which will be in accordance with IFRS. Ang pinaka-issue lang natin sa Partnership
Operations eh paano yung hatian nila ng PROFIT. And when we say, PROFIT,
malamang AFTER TAX na yan. May mga problems kasi na ibibigay yung Earnings
Before Taxes (EBT) tapos ibibigay yung tax rate, which is more often than not eh 30%.

We have different ways on how to divide profits. Basta ang importante eh yung
AGREEMENT NG PARTNERS. Dito na nagsisimula yung domino effect sa Partnership
Accounting. Kapag mali ang interpretation mo sa agreement ng partners patay na.

Anyway Heres the list kung paano sila mag-hahatian.

Equally
Arbitrary ratiorandom ratio na napagkasunduan. Ito yung mga percentages or
ratio na sasabihin the partners agree to have a 70:30 profit and loss ratio blah
blah. Later on may mga technicalities tungkol ditto.
Capital Ratios.
o Original Capital RatiosYung pinaka unang capital contribution nila.
o Beginning Capital RatiosBeginning balance ng capital accounts.
o Ending Capital RatiosMalamang yung end balance.
o Average Capital RatiosIto yung nakakaleche kapag capital ratios
ginamit. Icoconsider mo pa yung pag-galaw ng capital accounts sa bawat
buwan.

Tapos, sabi ni Satanas, hindi pa yan sapat para pahirapan tayo. Sabi niya, parang
kulang sa pagkagahaman ang ibang tao, kaya may i-co-consider pa tayong mga bagay:

Partners Annual Salaries

Partners Annual Interest
Partners Bonuses.

Whatever yung magiging agreement nila ang proforma entry lagi eh

Income Summary xxx

A, Capital xxx
B, Capital xxx

Yung supporting compution kung paano tayo naka-arrive sa amounts na ilalagay diyan
will be shouldered by our Notes to the Financial Statements.

SPECIAL CASE: WHAT IF WALANG AGREEMENT

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Like I said, lagging masususnod ang agreement ng partners regarding sa hatian ng
profit and loss. Minsan nga lang, may mga bagay na ayaw pag-usapan. Sensitive topic.
Lets not discuss it. Kaya naman tayo andito kasi sa journey hindi sa end, right?
Kung saan ka masaya, supported kita, bhe. At kung anu-ano pang kabalbalan sa
isang relasyon maisawasan lang ang usaping pera. Pero syempre. Accountant tayo. Di
pwedeng basta-basta at kung saan masaya si 1, susunod na lang si 2. HUSTISYA
PARA SA TANGA!

So paano kung walang napagkasunduan tungkol sa hatian?

Kapag wala BOTH PROFIT and LOSS RATIOS (Iba kulay para emphasis na plural yan
meaning yung dalawang ratio yung nawawala), gamitin niyo yung ORIGINAL CAPITAL
CONTRIBUTION. Past is past mga mukha niyo! WALANG KALIMUTAN! MAKALIMUT,
TANGA!

Kapag wala lang eh yung LOSS RATIO, gamitin niyo yung PROFIT RATIO on both
profit and loss.

Kapag wala lang eh yung PROFIT RATIO, HUWAG GUMAMIT NG LOSS RATIO!
Gamitin niyo yung ORIGINAL CAPITAL CONTRIBUTION!

Bakit? Anong rationale, bakit ito yung mga piniling ratios kapag wala ang isa? Kapag
nawawala ang profit ratio, you cant just say na equally yung pag-divide ng profit or loss.
1) Masakit yun para sa tangang sobrang daming kinontribute; 2) Pwedeng umabuso
yung isa at sabihin niyang, walang pinagusapan, pantay lang kami sa hatian, hindi ako
mag-eeffort. Bahala siya. Di ba? Ang sakit! #HustisyaParaSaTANGA! So we use the
original capital contribution ng mga partner. Mas may hustisya, i-co-consider natin yung
na-contribute ng bawat isa para matayo yung partnership natin.

Eh bakit kapag nawawala ang loss ratio, pwede na ang profit ratio while pag nawawala
yung profit ratio, bawal basta-bastang gamitin yung loss ratio? Eh kasi, we always think
about the positives. Kapag loss ratio yung ginamit mo, inaanticipate mo na
magkakaloss ka. Di ba masakit? Again, hustisya lang. And, again, gagamitin natin yung
Original Capital Contribution.

Kuya, is it possible na magka-iba yung dalawa? Bakit sila magiging iba? Di ba pwedeng
isang usapan, tapos?

In most accounting problems, yes, oo, iisa lang yang dalawang yan. PERO may mga
instances kasi na sobrang detalyado ng pag-uusap ng partners at magkaiba sila ng
profit and loss sharing. Pwedeng sa isang partner, sobrang taas ng profit ratio niya,
pero pagdating ng loss, sobrang baba. This is why, we dont use yung loss ratio.
Pwedeng may sugapaang nangyayari.

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Eh bakit pag nawawala yung loss ratio, okay na yung profit ratio, di ba madupang pa rin
yun?

Technically, yes. Pero kasi yung profit ratio, mabigat yung timbang niya eh. It
encompasses kung ano yung magiging outcome ng operations for the year. You dont
always have a loss naman, so ito na lang gagamitin.

Kuya, what if may bagong partner. Syempre we cannot use na yung original capital, so
anon a gagamitin?

Ang advance ng iniisip mo. Next lesson pa ya. Partnership Dissolution. Pero to
answer, gagamitin mong ratio, will be the new original capital contribution. Dissolution
means, may nabago sa Partnership natin at may matatayong bago. Remember
Pearson whatever sa Suits? Almost every episodes nagpapalit sila ng pangalan right
Pearson Spectre, Pearson Darby, etc. The change of name is synonymous to the
change of legal entity. Kaya ayun. May bago tayong original capital contribution.

Kuya, what if may Industrial Partner?

Mamaya ko yan sasagutin. Last portion nito pramis. Kung excited ka na, pwede ka
naming magskip. Hanapin mo dito. Pramis. Madidiscuss to.

SPECIAL CASE: USAGE OF AVERAGE CAPITAL AND CONCEPT OF TEMPORARY

AND PERMANENT WITHDRAWAL

Siguro naman, understandable naman na yung mga ratio, right? When it comes to
capital, mapa-beginning, original, or ending man, madali lang. Kunin mo lang yun from
both partners from there, gawa ka nan g fraction.

Pero what if ang gusto nila eh Average Capital, since sa tingin nila mas may hustisya ito
kesa sa kung ano mang ratio-ratio. Kasi, dito ma-tre-trace, kung anong changes
nangyayari sa capital account.

Arkham and Gotham are in a partnership. AG Partnership earned a profit of P550,000.

The partners agreed to have an annual salary of P24,000 each while the remainder

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shall be divided according to their average capital balances. The salaries are withdrawn
every month. Below are pertinent information of the partners capital accounts.

Date Event Arkham Gotham

1/1/2014 Beg. Bal. P320,000 P400,000
8/20/2014 Addl Investment 280,000
10/16/2014 Withdrawal (188,000)
11/12/2014 Withdrawal (110,000)
12/1/2014 Addl Investment 520,000
12/31/2014 End Balance P490,000 P732,000
Less: Ann. Sal. (24,000) (24,000)
End Balance P466,000 P708,000

We have two ways in which ma-co-compute natin yung average capital:

Months stayed.
Months unchanged.

In either method, dapat iisa lang sagot niyo. (BTW, gawa-gawa ko lang yan kasi wala
talaga silang formal names. HAHA!)

Months Stayed

Arkham # of mos. Stayed

Credits
P320,000 x 12 = P3,840,000
P280,000 x 04 = 1,120,000 P4,960,000
Debits
P110,000 x 02 = 220,000 (220,000)
4,740,000/12 = P395,000
Gotham # of mos. Stayed
Credits
P400,000 x 12 = P4,800,000
P520,000 x 01 = 520,000 P5,320,000
Debits
P188,000 x 02 = 376,000 (376,000)
4,944,000/12 = P412,000
Dito sa method na to, were measuring kung gaano tinagal yung presence/absence ng
investment/withdrawal sa isang taon.

Kuya, question, if we are measuring yung tinagal ng presence/absence ng

investment/withdrawal, bakit po hindi sinama yung sa salary, di ba withdrawal po yun?

Papasok na tayo sa next concept which is yung concept ng temporary at permanent

withdrawal. Sa basic accounting, universally, di ba, all withdrawals are permanent

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withdrawals. Hindi mo naman masasabi na yung pagbabalik niya ng pera after ilang
months niya winidraw eh pagbabalik nung winidraw niya, right? Papasok pa rin yun sa
additional investment. So how come yung salary will be considered temporary
withdrawal at bakit tayo nagkakaroon ng temporary withdrawal?

Nagkakaroon tayo ng temporary withdrawal kapag, duh, bumalik yung winidraw. In what
way, isang way eh yung salary natin. Pwede kasing usapan eh monthly withdrawal of
salary for the partners in such case pwede siyang mag form part ng Salaries Expense,
Drawings account, or direct debit sa Capital Account natin. Now yung salary kasi natin,
nakapaloob dapat yan sa net income natin for the year at sa end pa natin siya
gagalawin. Ito yung mga instances na gusto ka talagang pahirapan ni Satanas. Kasi
hindi moa lam kung iadd mo pa ba yung salaries sa net income para maka-aarrive ka
sa tamang hatian or what. Ill discuss later yung technicalities regarding salaries ng
partners.

Anyway, TEMPORARY WITHDRAWALS are your withdrawals na mapupunan ng profit

share mo (e.g. yung salaries and interest ng partners). Kaya as if parang hindi naman
siya winidraw talaga. Whereas your PERMANENT WITHDRAWALS are your
withdrawals, na parang sa basic accounting talaga. Alin yung kinokonsider natin sa pag-
compute nung average natin? PERMANENT. Bakit? From the word itself,
TEMPORARY! Parang hindi rin lumabas kasi papasok ulit. Nuggets? Shet. Parang
wrong analogy, ah. Hahahaha!

With that being explained, move on na tayo.

Months Unchanged

Arkham/Date Balance # of mos. unchange

01/01/2014 P320,000 x 08 = P2,560,000
08/20/2014 P600,000 x 02 = P1,200,000
11/12/2014 P490,000 x 02 = P980,000
P4,740,000/12 =
P395,000
Gotham/Date Balance # of mos. unchange
01/01/2014 P400,000 x 10 = P4,000,000
10/16/2014 P212,000 x 01 = P212,000
12/01/2014 P732,000 x 01 = P732,000
P4,944,000/12 =
P412,000
Kung sa Month Stayed, minemeasure natin yung tinagal ng investment/withdrawal, dito
minemeasure natin yung tagal ng pagka-stagnant ng capital balances natin. Were
measuring kung isang taon ba hindi ginalaw ni partner yung capital niya or what.

Kuya, hindi pa ba natin isosolve yung hatian?

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Mamaya. Discuss muna natin yung concept ng Salaries, Interest, at Bonuses ng
partners.

SALARIES, INTEREST, BONUSES

Salaries are your, well, syempre, yung sweldo ng partners. Minsan, napapag-agreehan
ng mga partners na since yung iba nagtratrabaho talaga sa partnership as industrial-
capitalist partners, pinapasweldo sila. Your salaries may be in annual or monthly form.
So ingat. Basahin mabuti yung problem. As in the situation kanina, pwedeng maging
temporary withdrawal ang salary. Dito ma-iillustrate yung reasoning kung bakit
temporary withdrawal siya.

Kuya, kapag ba may salaries, automatically, may withdrawal na nangyayari?

Nope. May mga pagkakataon lang na sasabihin ng problem na winiwidraw yung salary.
Pero as long as walang sinasabi, hindi niya winiwidraw yung salary niya at deretso yun
sa capital.

Interest naman, since basically investment to ng partners di ba? The mere fact na
nagkaroon ng partnership, means may investment na nangyari. So ito yung kumbaga
inaabangang payback ng partners sa kanilang capital balances. Same with your capital
ratios, pwedeng gamitin yung:

Original Capital
Beginning capital
Ending Capital
Average Capital

Same thing with salaries, your interests may also be in annual form or monthly form.
Kung pwedeng i-withdraw every month like salaries, yes. Pwede, depende sa given. So
watch out na lang.

As you can probably notice now, parang kambal yung Salaries and Interests na same
properties sila, pwedeng ma-withdraw, pwedeng annual, pwedeng monthly. Pinagkaiba
lang nila, yung isa fixed, yung isa to be determined pa.

With that being said, your salaries and interests, in almost all situations, will always be
provided to your partners whether kulang yung profit or may net loss ang partnership.

Kuya, you said in almost all situations, so may possibility na pwedeng pag-usapan nila
na kapag kinulang pwedeng wala? Like for example yung pinag-add yung annual
salaries nila sakto lang tapos kulang na for interest then napag-usapan nila na kapag
kulang hanggang dun lang sa makakaya. Sino po mas matimbang si salaries or si
interests?

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Depende sa usapan ng partners, in our case, yung pagkakasunod-sunod sa problem,
kapag mas naunang banggitin si interest, si interest muna, kapag nauna si salaries,
salaries muna.

What if naman po kung sa salaries mismo kulang na as in P500,000 yung total salaries
ng partners tapos ang profit eh P300,000 lang then same po yung usapan hanggang
dun lang?

Eh di i-prorate mo according sa salaries nila n/500,000 * 300,000 for each partner.

*AGAIN, IN RARE CASES NANGYAYARI TO! NORMALLY TALAGA, KE KULANG OR

MAY NET LOSS PRINOPROVIDE NG BUO YANG DALAWANG YAN*

Your bonuses naman eh yung bonus mo para sa managing partner for having a job well
done ng partnership, job well done sa pagmamanage, etc. Basta reward sa partner.
Now, unlike your salaries and interests, dedepende pa kung iproprovide mo to. Kasi
minsan, may mga indicator na hindi naman talaga well done yung performance ng
partnership/partner. Pwedeng bonus based on:

Profit alone
Profit after deducting salaries
Profit after deducting interests
Profit after deducting salaries and interests
Profit after deducting salaries and bonuses
Profit after deducting interests and bonuses
Profit after deducting salaries, interests, and bonuses

Now kung ang profit mo eh sufficient according sa condition ng bonus, meaning positive
number yung lalabas after lahat ng deduction, then may bonus ka. Ke sufficient si profit
to shoulder all of your Salaries, Interests, and Bonuses.

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Tanga, Inutil, and Martir are partners in a merchandising business. The partnership
earned a profit of P2,500,000. The partners ending capital are P230,000; P300,000;
and P420,000 respectively. The partners have agreed for the following profit sharing:

Annual salaries of P320,000; P210,000; P120,000 respectively.

Interests of 12% for Tanga and 10% for Martir, using the ending capital
balance as the base.
Inutil is to be paid a bonus of 12% on profit after salaries and interests.
The remainder will be distributed on 3:4:5 ratio.

Solution:

Tanga Inutil Martir Total

Ann. Sal. P320,000 P210,000 P120,000 P650,000
Interests* 27,600 42,000 69,600
Bonus** 213,648 213,648
Remainder 391,688 522,251 652,813 1,566,752
Total P739,288 P945,899 P814,813 2,500,000

*Tanga: 230,000 x 12%; Martir: 420,000 x 10%

**(2,500,000 650,000 69,600) x 12%

Para ka lang nag-su-sudoku. Pero mas madali kesa sa Sudoku. Ang Sudoku
sinusunog! SINUSUNOG!

What if yung bonus is profit after salaries, interests, and bonuses? Mag-iiba ba yung
sagot natin? Lets see.

Tanga Inutil Martir Total

Ann. Sal. P320,000 P210,000 P120,000 P650,000
Interests* 27,600 42,000 69,600
Bonus** 190,757 190,757
Remainder 397,411 529,881 662,351 1,589,643
Total P745,011 P930,638 P824,351 2,500,000

* Tanga: 230,000 x 12%; Martir: 420,000 x 10%

**(2,500,000 650,000 69,600 B) x 12% = B

Nung inafter bonus natin siya, nag-algebra tayo, kumbaga yung basis ng bonus natin,
nakabawas na yung mismong bonus natin.

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What if naman P250,000 lang yung profit, same conditions

Tanga Inutil Martir Total

Ann. Sal. P320,000 P210,000 P120,000 P650,000
Interests 27,600 42,000 69,600
Bonus
Remainder (117,400) (156,533) (195,667) (469,600)
Total P230,200 P53,467 (P33,667) P250,000

Ay shet, kuya! May negative! Pwede ba yun?! Paano entry?

Wala tayong magagawa yan yung napag-kasunduan nila eh.

Income Summary P250,000

Martir, Capital 33,667
Tanga, Capital 230,200
Inutil Capital 53,467

What if naman P250,000 pa rin yung profit. Pero this time yung bonus eh after interest
lang?

Tanga Inutil Martir Total

Ann. Sal. P320,000 P210,000 P120,000 P650,000
Interests 27,600 42,000 69,600
Bonus* 21,658 21,648
Remainder (122,812) (163,749) (204,687) (491,248)
Total P224,788 P67,909 (P42,687) P250,000

*(250,000 69,600) x 12%

What if net loss naman tayo ng P250,000?

Tanga Inutil Martir Total

Ann. Sal. P320,000 P210,000 P120,000 P650,000
Interests 27,600 42,000 69,600
Bonus
Remainder (242,400) (323,200) (404,000) (969,600)
Total P105,200 (P113,200) (242,000) (P250,000)

Ay weh! Tang ina! Totoo ba? May Nagpositive?!

Yep. Pwede yan. In accordance yan sa usapan nila.Bakit? Naprotektahan ng Salary.

Remember that kahit anong mangyari. Ceteris paribus, lagging prinoprovide ang
salaries sa mga partners.

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SPECIAL CASE: INDUSTRIAL PARTNER

Things to remember:

Hindi nagkakaroon ng loss si industrial partner. Kung ano mang loss ma-incur ng
partnership, hindi siya affected.
Kung walang binanggit na profit and loss sharing, syempre assume na original
capital, since walang capital contribution si industrial partner, yung share niya sa
profit will be decided by the partners among themselves. Kung ano man mapag-
usapan nila, yun na yung kay industrial partner. Dito pumapasok yung concept
ng salaries as to partner.
1 in 1000 mong mararanasan ang isang problem na may industrial partner. So
makakahinga ka na ng mabuti. Pero hindi ganun kabuti kasi isang tinik lang yan.

So there, basically, diyan lang naman umiikot partnership operation. Kaya maraming
daldal sa libro kasi inisa-isa yung bawat situation. Pinag-isa ko na kasi, parang
redundant na siya. I mean, sa what ifs palang natin, parang umay na sa paulit-ulit di ba?
Anyway, kung may parang feel niyong, nalaktawan ko, message niyo ako sa FB. ^_^

Things to watch out:

Dates (average capital)

Sequencing ng agreements.
Wordings dahil ang isang word ay pwedeng ikapahamak or ikapanalo mo.
Profit minsan may mga profit nan aka-deduct na dun yung partners salaries.
Bonus in what manner siya cocomputin at kung magpopositive ba after mo
madeduct lahat ng dapat madeduct.
Ratios again, hindi porket 2:3:5 = 100 na kagad. Check niyo muna.
Capital balances check niyo din kung ano ba gagamitin, average, original,
ending, beginning. Parang chicken lang yan sa KFC eh. Maraming pagpipilian.
Basically, wordings talaga kayo mag-ingat dito. And usually, dito nangdadali
partnershipAdvAcc in general. Isang maling intindi lang sa phrase or word,
wala na, mali na ginagawa niyo.

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