Activity 2: Skill-building Activities (with answer key) (18 mins + 2 mins checking)

Directions: Try this exercise and see how well do you understand the concepts about
manufacturing. In
the spaces provided, write T if the statement below is true otherwise F if it is false.
F 1) A partnership agreement may validly stipulate that one partner shall receive no share in
profits or losses.
T 2) If a partnership agreement does not specify how profits or losses are to be distributed,
they
should be allocated based on relative capital account balances.
T 3) In the absence of agreement for distribution of profit, the share of industrial partner in
profit is
not fixed because it is based on what is just and equitable under circumstances.
T 4) The industrial partner is not liable for losses since he cannot withdraw the work or labor
already done.
F 5) The capitalist-industrial partner is not liable for any losses.
F 6) Profits or losses are divided equally among the partners unless partnership agreement
specifies otherwise.
F 7) In the absence of a specific agreement, the law requires that partnership profits be
divided
equally among partners.
T 8) 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.
T 9) If an error resulted in an understatement of profit in previous periods, a correcting entry
would
be needed to increase capital.
F 10) If an error resulted in an overstatement of profit in previous periods, a correcting entry
would
be needed to increase capital.

Activity 3: Check for Understanding (5 mins)

Direction: Use the table below to summarize the rules for the distribution of profits or losses. Try
to
complete the exercise before looking at the Key to Corrections for feedback.

With According to agreement According to agreement

agreement

Without 1. In the absence of loss

agreeme 1. Share of capitalist partner sharing
is in proportion to his capital agreement, use profit sharing
contribution (ratio of original agreement
capital investment or in its 2. In the absence of any
absence, ratio of capital
balances at the beginning of
the
year)
2. Share of industrial partner
is not fixed – as may be just
and equitable under the
circumstances
agreement, losses shall be
divided according to capital
contribution
3. Purely industrial partner is
not
liable for losses