BONUS:

 On February 29, 2016, Squee, Spleen,

and Spoon formed Goblin Techies
Partnership. The profit sharing
arrangements are as follows:
Until June 30, 2016, Spoon, being the
managing partner, will be given an
annual salary of ₱60,000 while other
partners will receive ₱2,000 monthly
interest each. The residual profit will
be shared in the ratio of 2:3:5 to
Squee, Spleen, and Spoon,
respectively. From July 1, 2016,
salaries and interest will be
discontinued and the profit is to be
divided in the revised ratio of 3:4:5.
Profit for the year-ended Dec. 31, 2016
was ₱1,000,000 before charging
partner’s salaries and interests,
accruing evenly through the year, and
 after charging an expense of
₱120,000, which was incurred from
March 31, 2016 to September 1, 2016.
How much is the share of Spleen in
2016 net income?

 Closing entries of
a partnership
 REVENUES AND GAINS

 EXPENSES AND LOSSES

 The balance of the Income Summary
account, which represents profit or
loss of the partnership, is transferred
either to the drawing accounts or
directly to the capital accounts of the
partners.

 The balance of the drawing account

of each partner is transferred to
his/her capital account.
 PARTNERS’ SHARE IN PROFITS AND
LOSSES

*PROFIT

*LOSS
 *PROFIT

*LOSS
 The distribution or division of profits
and losses may be expressed in
several ways as follows:

• By percentage
• By fraction
• By decimal
• By ratio
• By percentage Nick 25%
(100,000/400,000)
Nerio 75% (300,000/400,000)

2. By fraction Nick 1/4

 Nerio 3/4

3. By decimal Nick .25

(100,000/400,000)
Nerio .75 (300,000/400,000)

4. By ratio Nick and Nerio 1:3,

respectively
 Note:
 As to industrial partner: if silent; the
industrial partner shall receive an
equal percentage of the capitalist
partner with the smallest share in the
profit.
6. By allowing salaries, interest on
partners’ capital, bonus to the
managing partner and the balance in
an agreed ratio (combination of 3 to
5)
BONUS:
 On February 29, 2016, Squee, Spleen,
and Spoon formed Goblin Techies
Partnership. The profit sharing
arrangements are as follows:
Until June 30, 2016, Spoon, being the
managing partner, will be given an
annual salary of ₱60,000 while other
partners will receive ₱2,000 monthly
interest each. The residual profit will
be shared in the ratio of 2:3:5 to
Squee, Spleen, and Spoon,
respectively. From July 1, 2016,
salaries and interest will be
discontinued and the profit is to be
divided in the revised ratio of 3:4:5.
Profit for the year-ended Dec. 31, 2016
was ₱1,000,000 before charging
partner’s salaries and interests,
accruing evenly through the year, and
after charging an expense of
₱120,000, which was incurred from
 March 31, 2016 to September 1, 2016.
How much is the share of Spleen in
2016 net income?
 EXAMPLE #1:
 A, B, C and D are partners in
Abakada Partnership. A contributed
cash of 150,000 and equipment with
fair value of 250,000 on January 1,
2016. B also contributed cash of
200,000. C contributed machinery
worth 250,000 and D contributed his
services. The profit/loss will be
shared by partners A, B, and C in the
ratio of 4:5:7, respectively.
 Case 1: If there is a loss of
300,000, how much should be the
share of D?
 Case 2: If the net income for 2016
is 500,000, how much should be the
share of D?
 Case 1: If there is a loss of
300,000, how much should be the
share of D?
Answer: 0, because industrial partner
will not share in the loss, unless there
is a stipulation to the contrary
 Case 2: If the net income for 2016
is 500,000, how much should be the
share of D?
Answer:
 Example #2:
 On January 1, 2017, Cathy, Yanyan, and
Lolay formed a partnership with the
following contributions:
Cathy P280,000
Yanyan 300,000
Lolay 170,000
The partnership agreement; all profits will
be distributed as follows:
 Yanyan who manages the partnership
is to receive a salary of P16,500
monthly.
  The partners will be allowed with
interest equal to 15% on beginning
capital.
 Balance is to be divided 25:30:45
 On December 31, 2017, after the
following partners’ additional
investments and capital withdrawals,
the partnership has a total capital of
P975,000.
Additional Investments
Withdrawals
Cathy P96,000 -
Yanyan 60,000 P90,000
Lolay - 72,000
 What are their capital balances on
December 31,2017?

 First get the net income:

P975,000-(P750,000+156,000-
162,000)
NI = P231,000
 Example #3:
 The following data are available in
the books of EZ Partnership for the
year 2017.

 Twelve cases will be illustrated using

the given data. Cases 1-10 will show
sufficient profit. Case 11 will show
insufficient profit, and case 12 shows
a loss.
 Case 1- Profit is divided equally

 Case 2- Profit is divided ¾ and ¼ to E

and Z
 Case 3-Profit is divided in the ratio of
1:2 to E and Z
 Case 4- Profit is divided 20% and 80%
to E and Z

 Case 5- Profit is allocated based on

the beg. capital ratio

 Case 6-Profit is allocated based on

ending capital ratio
 Case 7- Profit is allocated based on
the ave. capital ratio
 Case 8- Each partner is allowed 10%
int. on ending capital and the
remaining income is divided 60%,40%

 Case 9- Z is allowed salaries of

P500,000 and the remaining profit is
divided in the ratio of 1:4

 Case 10- Z the managing partner, is

allowed a bonus of 20% of profit
BEFORE bonus and income tax and
the remainder is divided in the ratio
of beg. capital.
Income tax rate is 30%.
 Case 11- The partners are allowed
P5,000 and P10,000 weekly salaries,
respectively, 10% interest on average
capital, and the remainder is divided
in the ratio of 2:3.
 Case 12- Assume the same agreement
as in Case 11 except that instead of a
profit, the partnership has incurred a
loss of P100,000.

 Illustrations on the computation of

bonus using other assumptions. The
same data in the example above
shall be used. Bonus rate is 20%
tax rate is 30%. Net income is
P600,000
• Bonus is based on profit after
deducting bonus but before
deducting income tax

• Bonus is based on profit after

deducting income tax but before
deducting bonus

3. Bonus is based on profit after

deducting both bonus and income
tax