Dividing Net Income or Net Loss Pariners equally share partnership net income or net loss unless the partnership ‘contract indicates otherwive. The same basis of division usally applies to both nel Jncome and not loss It s customary to refer to this basis <= tho income ratio the income and loss ratio, or the profit and loss (P&L) ratio. Because of its wide ‘acceptance, we will use the term income ratio to identify the basis for dividing net income and net loss.The partnership recognizes a partner's share of net income or ‘et loss in the accounts through closing entries. CLOSING ENTRIES [As in the case of a proprictorship, a partnership must make four entriesin prepar: ing closing entries. The entries are: 41. Debit cach revenue account for its balance, and credit Income Summary for total revenues. 2. Debit Income Summary for total expenses, and credit each expense cccount for its balance. 3. Debit Income Summary for its balance, and credit each partners capital account for his or her share of net income. Or, credit Income Summary. and debit each partner's capital account for his or her share of net loss. 4. Debit each partner's capital account for the balance in that partner's drawing account, and credit each partner's drawing account for the same amount.