PARTNERSHIP FORMATION

DIVISION OF PROFITS AND LOSSES

1. Per agreement
2. If no agreement, capital contribution
a. Original capital balance
b. Beginning / ending
c. Average capital balance
3. If agreement is for profit only, same manner for loss.
4. If agreement is for loss only, use capital contribution

SALARIES

 This could be fractional year

 Given, regardless of the result of operation

INTEREST

 This could be in fractional year

 Given, regardless of whether there is profit or loss
(Use the salary/interest ratio if the problem states that the amount to be distributed to the
partners is up to the extent of profit only or the profit is distributed based on the priority.)

BONUS

 This is given if there is a profit only

 Bonus is not always given if there is profit

1. If problem is silent, Net Income is assumed before salaries, interest, and bonus.
Ex.: Net Income of ₱500,000 before salaries of ₱55,000, interest of ₱13,000, and bonus of 15%
Net Income -Salaries -Interest
B= x Bonus Rate 432,000
1 + Bonus Rate B= x 15%
1.15
500,000 - 55,000 - 13,000 B= 56,347.83
B= x 15%
1 + .15

2. Net Income after salaries, interest, and bonus.

Ex. Net Income of ₱100,000 before salaries of ₱5,000, interest of ₱3,000, and bonus of 10%

Net Income + Salaries +Interest

B= x Bonus Rate 108,000
1 - Bonus Rate B= x 10%
0.9
100,000 + 5,000 + 3,000 B= 12,000.00
B= x 10%
1 - .10

EXAMPLE ON HOW TO COMPUTE THE AVERAGE CAPITAL: