FUDAMENTALS OF ACCOUNTING II

Chapter 5
ACCOUNTING FOR PARTNERSHIP
4.1 Introduction

A business can be organized in the form of a sole proprietorship, a partnership firm or a company. In
doing business sometimes a single person might have the necessary intelligent and the resources that
are needed and therefore he would have carried on his business as an individual. Such cases are
however so rarely practical in life. Due to this then almost every businessman needs help from others
in business, which requires huge resources for the ongoing expansion programs. One of the inevitable
ways to overcome intellectual and resource constraint is to form partnership by joining hands with
person(s) who can complement the efforts by bringing in the necessary intellectual as well as financial
capital. This chapter is devoted to the basic aspects of partnership accounting.

Towards properly comprehending basic accounting concepts in relation to partnership are discussed
herewith. Owing the fact that the basic accounting procedure is similar in to other forms of
organizations it is on certain special features in the accounts of a partnership firm are dealt in detail.
The special features relate to the distribution of profits, the maintenance of capital accounts and the
adjustments required when the firm is reconstituted. In this chapter, we shall study the nature of
partnership and discuss the basic aspects of partnership accounts like preparation of capital accounts,
distribution of profits amongst partners and change in the profit-sharing ratio of the existing partners
along with preparation of Profit and Loss Account and Balance Sheet of the partnership firm. At the
end of the chapter problems are annexed so that you might be able to exercise concepts you have
learned.

The sole proprietorship has its limitations such as limited capital, limited managerial ability and
limited risk-bearing capacity. Hence, when a business expands or when it is to be set up on a scale,
which needs more capital and involves more risk, two or more persons join hands to run it. They agree
to share the capital, the management, the risk and profits of the business. Such mutual economic
relationship based on a written or an oral agreement amongst these persons is termed as 'partnership'.
The persons who have entered into partnership are individually known as 'partners' and collectively as
'firm'. A partnership is, then, an association of two or more persons to carry on as co-owners of a
business for profit.
4.2 Basics of Partnership- Common Characteristics:
The following are a common characteristic that hallmarks partnership from other formations:
 Mutual Agency-the action of any partner is binding on all other partners when the partner is
engaging in partnership business. The firm's business may be carried on by all the partners or
any one of them acting for all. This means that partnership is based on the concept of mutual
agency relationship. A partner is both an agent (he can, by his acts, bind the other partners) and
a principal (he is bound by the acts of other partners). The implication of this is that partner
binds others and others bind him in the same way. Further implication of this is that each
partner is entitled to participate in the conduct of business affairs and act for and on behalf of
the firm.
 Limited Life-the partnership is dissolved whenever a new partner is admitted to the
partnership or an old partner withdraws from the partnership.
 Unlimited Liability-each partner is personally liable for the liabilities of the partnership if the
partnership assets are insufficient to settle the liabilities of the partnership.
 Co-ownership of Property-partnership assets are owned jointly by all the partners
 Participation in Income-net income and loss are distributed among partners according to their
agreement. The agreement should be to share the profits of the business. If some persons join
hands to carry on some charitable activity, it will not be termed as partnership. Of course, the

Lecture Notes on Fundametals of Accounting-II, Chapter V. 1

 ratio in which the partners will share the profits is determined by the agreement or in the
absence of the agreement; it is shared equally amongst the partners.
 Separate Capital Accounts-separate capital and drawing accounts are maintained for each
partner to keep track of each partner’s claim against the partnership’s assets
 Taxation-the net income of the partnership is not taxed at the partnership level, but is allocated
to the partners and is included as income on their individual tax returns.
4.3 Advantage and Disadvantage of Partnership
The primary advantage of partnership is related to it easiness and its less expensiveness to organize it.
Secondly, the partnership agreement easily marshals more capital, more managerial skills and
experience than a sole proprietorship. Thirdly, partnership income is taxed only once rather than twice
as it was the case of corporation. The disadvantages of partnership are its limited life, unlimited
liability, and mutual agency.
 Partnership agreement
A partnership is formed by an agreement. This agreement may be written or oral. Though the law does
not expressly require that there should be an agreement in writing but the absence of a written
agreement may be a source of trouble in managing the affairs of the partnership firm. Therefore, a
partnership deed should be written, assented and signed by all the partners. Hence, it could be said that
a partnership agreement is the written agreement between the partners stipulating how the partnership
is to be operated, including the distribution of net income to the partners. If there is no partnership
agreement, net income is allocated equally to all the partners.
 Contents of Partnership Deed
The partnership deed usually contains the following particulars:
particulars:
 Name of the firm;
 Names and addresses of all partners;
 Nature and place of the business;
 Date of commencement of partnership;
 Duration of partnership, if any;
 Amount of capital contributed or to be contributed by each partner;
 Rules regarding operation of bank accounts;
 Ratio in which profits are to be shared;
 Interest, if any, on partners' capital and drawings;
 Interest on loan by the partners(s) to the firm;
 Salaries, commissions, etc. if payable to any partner(s);
 Mode of auditor's appointment, if any;
 Rules to be followed in case of admission, retirement, death, of a partner;
 Settlement of accounts on dissolution of the firm; and
 Mode of settlement of disputes among the partners.
4.4 Provisions Affecting Accounting Treatment
Normally, a partnership deed covers all matters relating to the mutual relationship amongst the
partners. But if the deed is silent on certain matters or in the absence of any deed or an express
agreement, the relevant provisions of the Partnership Act shall become applicable. It is, therefore,
necessary to know the provisions of the Act, which have a direct bearing on the accounting treatment
of certain items. These are as follows:
1. Profit Sharing: The partners shall share the profits of the firm equally irrespective of their capital
contribution.
2. Interest on Capital: No interest is allowed to partners on the capital contributed by them. Where,
however, the agreement provides for interest on capital, such interest is payable only out of the profits
of the business. In other words, if there are losses, interest on capital will not be allowed even if the
agreement so provides.
3. Interest on Loan: If any partner, apart from his share of capital, advances money to the firm as a
loan, he is entitled to interest on such amount. Such interest shall be paid even out of the assets of the

Lecture Notes on Fundametals of Accounting-II, Chapter V. 2

firm. This means that interest on loan shall be paid even if there are losses. Implying, thereby, that it is
a charge against the revenues
4. Interest on Drawings: No interest will be charged on drawings made by the partners.
5. Remuneration to Partners: No partner is entitled to any salary or commission for participating in
the business of the firm.
 It should be remembered that the above rules are applicable only in the
absence of any provision to the contrary in the partnership agreement.

4.5 Accounting for Partnership

 Formation of Partnership
At the time of formation accounting treatment requires the assets and liabilities contributed to the
partnership should be recorded at their fair market value at the date of formation of the partnership,
and the partners' capital accounts are credited for the recorded value of the net assets contributed by
each partner.
Illustration 1-A, B, and C formed a partnership; A contributed inventory with a fair market value of
100,000; B contributed equipment with a fair market value of 180,000 and a building with a fair
market value of 600,000 and subject to a 480,000 mortgage; C contributed 100,000 in cash.
Required: Pass the necessary journal entries to record the investment.

Cash 100,000
Inventory 100,000
Equipment 180,000
Building 600,000
Mortgage Payable 480,000
A, Capital 100,000
B, Capital (180,000 + (600,000 – 480,000)) 300,000
C, Capital 100,000

4.6 Division of Net Income or Loss

 Objective
The objective of the partnership's profit and loss sharing arrangement is to allocate the profit and loss
of the partnership among the partners in a way that reflects each partner's contribution to the success of
the firm.
 Allocation Basis
Based on partnership agreement for the allocation of the profit and loss of the partnership usually takes
one or a combination of the following forms:
 Fixed Ratios-profit and loss is allocated to the partners by providing a fixed percentage of
profit and loss to the partners
 Service Contributions-salary & allowances are provided to the partners to reward the
individual partners for their different service contributions to the operation of the partnership
 Capital Investments-capital allowances, usually in the form of interest on the capital balances
of the individual partners, are provided to the partners to reward the individual partners for
their different capital investments.
Illustrations for Division of Profits
Illustration 3: Net income exceeding allowances:
A, B, and C are partners with profit-and-loss sharing ratios 30%, 25%, and 45%, respectively, and
capital balances of 50,000, 100,000, and 350,000, respectively; the partnership agreement provided for
salaries of 20,000 for A, 25,000 for B, and 15,000 for C and 10% interest on the partners' capital
balances; net income was 140,000.
Required: Show the Division of Profits

Lecture Notes on Fundametals of Accounting-II, Chapter V. 3

 A B C Total
Salaries 20,000 25,000 15,000 60,000
Interest 5,000 10,000 35,000 50,000
Fixed Ratio 9,000 7,500 13,500 30,000
34,000 42,500 63,500 140,000
Interest:
A = 10% x 50,000 = 5,000
B = 10% x 100,000 = 10,000
C = 10% x 350,000 = 35,000
Fixed Ratio:
A = 30% x (140,000 – (60,000 + 50,000)) = 9,000
B = 25% x (140,000 – (60,000 + 50,000)) = 7,500
C = 45% x (140,000 – (60,000 + 50,000)) = 13,500
Illustration 4: Allowances Exceeding Net Income:
A, B, and C are partners with profit-and-loss sharing ratios of 30%, 25%, and 45%, respectively, and
capital balances of 50,000, 100,000, and 350,000, respectively; the partnership agreement provided for
salaries of 20,000 for A, 25,000 for B, and 15,000 for C and 10% interest on the partners' capital
balances; income was 100,000.

Required: Show the Division of Profits

_A B C Total_
Salaries 20,000 25,000 15,000 60,000
Interest 5,000 10,000 35,000 50,000
Fixed Ratio (3,000) (2,500) (4,500) (10,000)
22,000 32,500 45,500 100,000
Interest:
A = 10% x 50,000 = 5,000
B = 10% x 100,000 = 10,000
C = 10% x 350,000 = 35,000
Fixed Ratio:
A = 30% x (100,000 – (60,000 + 50,000)) = (3,000)
B = 25% x (100,000 – (60,000 + 50,000)) = (2,500)
C = 45% x (100,000 – (60,000 + 50,000)) = (4,500)

4.7 Financial Statements For Partnership

Details of the division of NI/L should be described in the financial statements prepared at the end of
the fiscal period. In addition, details of changes in the owner’s equity of a partnership during the
period should be presented in the statement of owner’s equity of a partnership during the period should
be presented in the statement of owner’s equity.

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Illustration 5: A typical statement of owner’s equity

ST partnership
Statement of Owner’s equity
For the year ended Dec. 31, 2010
A B Total
Capital, beginning of 2005 472,500 107,500 580,000
Add. Additional investment during 2005 7,500 12,500 20,000
Subtotal 480,000 120,000 600,000
Net Income for the year 57,000 33,000 90,000
Subtotal 537,000 153,000 690,000
Loss: Withdrawals during the year (20,000) (10,000) (30,000)
Capital, Dec. 31, 2005 517,000 143,000 660,000
 Changes in Ownership
Since a change in ownership creates a new partnership, the assets and liabilities of the old partnership
should be revalued to reflect fair market value at the date of change in ownership. The change in
ownership might result out of the following reasons. The common causes of dissolutions are admission
of new partners, death, bankruptcy or withdrawal of a partner. It has to be remembered however
dissolution of the partnership is not necessarily followed by the winding up of the affairs of the
business.
 Investment in Partnership
Investment in partnership occurs when the new partner gains admission to the partnership by investing
assets directly into the partnership or purchase of an interest from one or more of the current partners.
In case where admission of partnership is by contribution of assets, the assets and liabilities invested in
the partnership should be recorded at their fair market value at the date of investment in the
partnership, and the new partner's capital account is credited for his capital interest multiplied by the
recorded value of the net assets of the partnership after the investment of the new partner with the
difference, if any, between the recorded value of the net assets invested by the new partner and the
amount recorded in his capital account (bonus payment) allocated to the old partners on the basis of
their profit and loss sharing ratios before the investment of the new partner
Illustration 6: Asset contributed is equal to capital contributed
A and B are partners with profit and loss sharing ratios of 25% and 75%, respectively, and capital
balances of 130,000 and 70,000, respectively; C invested 50,000 in cash for a 20% capital interest in
the partnership.
Required: Pass the necessary journal entries to record the investment.
C = 20% x (130,000 + 70,000 + C)
C = 50,000
Cash 50,000
C, Capital (20% x (200,000 + 50,000)) 50,000
Illustration 7: A and B are partners with profit and loss sharing ratios of 25% and 75%, respectively,
and capital balances of 130,000 and 70,000, respectively; C invested 60,000 in cash for a 20% capital
interest in the partnership; C agreed that the partnership had goodwill of 40,000.
Required: Show the necessary journal entries to record the investment.
C = 20% x (130,000 + 70,000 + 40,000 + C)
C = 60,000
Cash 60,000
C, Capital (20% x (200,000 + 60,000)) 52,000
A, Capital (25% x (60,000 - 52,000)) 2,000
B, Capital (75% x 8,000) 6,000

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Illustration 8: A and B are partners with profit and loss sharing ratios of 25% and 75%, respectively,
and capital balances of 130,000 and 70,000, respectively; C invested 30,000 in cash for a 20% capital
interest in the partnership; A and B agreed that C had goodwill of 20,000.
Required: Perform the necessary journal entries to record the investment.
C + 20,000 = 20% x (200,000 + C + 20,000)
C =30,000
Cash 30,000
A, Capital (25% x (30,000 – 46,000)) 4,000
B, Capital (75% x (16,000)) 12,000
C, Capital (20% x (200,000 + 30,000)) 46,000
Illustration 9: On April 1, the partnerships of A and B admits C, who is to contribute cash of 15,000
and machinery with current market price of 25,000. The Capital balances of A and B after assets are
adjusted to current market price are 50,000 and 64,000, respectively. The partners agree, however, that
the partnership is worth 130,000 considering good will to the partnerships. The old partners have been
sharing income in the ratio of 2:3.
Required:
a) Carry out the journal entries on April 1, to record admission of the new partner, and
b) What is the interest of each partner’s capital balance over the total partnerships equity?

Solution
Total Owner’s Equity before Admission (50,000 + 64,000) 114,000
Revaluation of the partnerships 130,000
Goodwill attributable to the old partners 16,000
a) (1) Good will 16,000
A’s, Capital (2/5x16, 000) 6,400
B’s, Capital (3/5x16, 000) 9,600

(2) Cash 15,000

Machinery 25,000
C’, Capital 40,000
b) Total capital = A’s Capital (50,000+6,400) = 56,400
B’s Capital (64,000+9,600) = 73,600
C’s Capital (15,000+25,000) = 40,000
Total Capital =170,000
Interest of A = 56,400 = 33.18%
170,000
Interest of B = 73,600 = 43.29%
170,000
Interest of C = 40,000 = 23.53%
170,000
 If bonus is given to a new partner, it will be deducted from the old partners.
 Purchase of an Interest
The new partner gains admission to the partnership by transferring assets directly to one or more of the
old partners. In such instances the new partner's capital account is credited for his capital interest
multiplied by the recorded value of net assets of the partnership, and the old partners' capital accounts
are debited for the new partner’s capital interest multiplied by the old partners’ capital account
balance.
Illustration 10:
A and B are partners with profit and loss sharing ratios of 25% and 75%, respectively, and capital
balances of $130,000 and $70,000, respectively; C purchased a 20% capital interest in the partnership
by purchasing 20% of A’s capital balance for $26,000 and 20% of B’s capital interest for $14,000.

Lecture Notes on Fundametals of Accounting-II, Chapter V. 6

Required: Pass the necessary journal entries to record the investment.
 C’s Cost of Capital will be; = 20% x 200,000= 40,000
 C’s Recorded Share of Investment will be:
A, Capital (20% x 130,000) 26,000
B, Capital (20% x 70,000) 14,000
C, Capital (20% x 200,000) 40,000
Illustration 11:
A and B are partners with profit and loss sharing ratios of 25% and 75%, respectively, and capital
balances of $130,000 and $70,000, respectively; C purchased a 20% capital interest in the partnership
by purchasing 20% of A’s capital balance for $28,000 and 20% of B’s capital interest for $20,000; C
agreed that the partnership had goodwill of $40,000
Required: Perform the necessary journal entries to record the investment.
 C’s Cost of Capital will be; = 20% x (200,000 + 40,000) = 48,000
 C’s Recorded Share of Investment will be:
A, Capital (20% x 130,000) 26,000
B, Capital (20% x 70,000) 14,000
C, Capital (20% x 200,000) 40,000
Illustration 12:
A and B are partners with profit and loss sharing ratios of 25% and 75%, and capital balances of
$130,000 and $70,000, respectively; C purchased a 20% capital interest in the partnership by
purchasing 20% of A’s capital balance for $23,500 and 20% of B’s capital interest for $6,500; A and
B agreed that C had goodwill of $12,500.
Required: Pass the necessary journal entries to record the acceptance of the new partner.
 C’s Cost of Capital will be; C + 12,500 = 20% of (200,000 + 12,500)
C + 12,500 = 42,500
C = 30,000
 C’s Recorded Share of Investment will be:
A, Capital (20% x 130,000) 26,000
B, Capital (20% x 70,000) 14,000
C, Capital (20% x 200,000) 40,000
 Withdrawal of a Partner
The old partner leaves the partnership by withdrawing assets from the partnership to liquidate his
capital interest. In such instances the retiring partner's capital account is zeroed out with the difference,
if any, between the assets withdrawn by the retiring partner and his capital balance (bonus payment)
allocated to the remaining partners on the basis of their relative profit and loss sharing ratios before the
withdrawal of the retiring partner
Illustration 13:
A, B, and C are partners with profit and loss sharing ratios of 20%, 60%, and 20%, respectively, and
capital balances of $135,000, $70,000, and $55,000, respectively; C withdrew $55,000 in cash from
the partnership to liquidate his capital interest in the partnership.
Required: Show the necessary journal entries to record the withdrawal of the existing partner.
C, Capital 55,000
Cash 55,000
Illustration 14:
A, B, and C are partners with profit and loss sharing ratios of 20%, 60%, and 20%, respectively, and
capital balances of $135,000, $70,000, and $55,000, respectively; C withdrew $65,000 in cash from
the partnership to liquidate his capital interest in the partnership; A, B, and C agreed that the
partnership had goodwill of $50,000.
Required: Show the necessary journal entries to record the withdrawal of the existing partner.

Lecture Notes on Fundametals of Accounting-II, Chapter V. 7

  C’s Total Balance, including the Calculated Share of the Good Will, will be:
C = 55,000 + (20% x 50,000) = 65,000

 The entry made in relation to the withdrawal of C will be:

C, Capital 55,000
A, Capital (20% / 80% x (55,000 - 65,000)) 2,500
B, Capital (60% / 80% x 10,000) 7,500
Cash 65,000
 Liquidation
The sale of the partnership assets, payment of the partnership’s liabilities, and the distribution of any
remaining assets to the partners are basic activities undertaken at time of liquidation. Accounting
treatment related to liquidation are a two step processes, namely, realization of assets by selling them
and distribution of realization proceeds.
 Realization of Assets-any gains or losses realized from the sale of partnership assets
are allocated to the partners using their profit and loss sharing ratios.
 Distribution of Realization Proceeds-the claims against the assets of the partnership
are satisfied in the following order:
1) Creditors-amounts owed to partnership creditors are paid first,
2) Partners-amounts owed to partners for their capital balances
to the extent of credit balances in their capital accounts.
 Capital Deficiency-a debit balance in a partner's capital account represents a claim of the
partnership against that partner. In such instances the options are:
1) Cash Contribution-if a partner with a debit balance in his capital account contributes cash to the
partnership to make up his capital deficiency, the debit balance in his capital account is reduced for
the amount of cash contributed.
2) No Contribution-if a partner with a debit balance in his capital account does not contribute cash to
the partnership to make up his capital deficiency or contributes insufficient cash to the partnership
to make up his capital deficiency, the debit balance in his capital deficiency is allocated to the
other partners in their relative profit and loss sharing ratios.
Illustrations 15- Gain on realization:
A, B, and C are partners with profit and loss sharing ratios of 20%, 60%, and 20%, respectively; the
partnership balance sheet consisted of cash of $20,000, non-cash assets of $270,000, liabilities of
$40,000, and capital balances of $140,000 for A, $60,000 for B, and $50,000 for C; the partnership
was liquidated by selling the non-cash assets for $310,000; the partners have sufficient cash to make
up any capital deficiencies.
Required: Show the Liquidation Process and Allocation of the Gain on the Realization.
Non-cash A B C
_Cash_ _Assets Liab. Capital Capital Capital
BBR 20,000 270,000 40,000 140,000 60,000 50,000
Realization 310,000 (270,000) _ 8,000 _24,000 8,000
Balance AR 330,000 _ --- _ 40,000 148,000 84,000 58,000
Pay. of Lia. (40,000) (40,000) _ _ _ _ _ _
BAPL 290,000 _ --- _ 148,000 84,000 58,000
ARB (290,000) (148,000) (84,000) (58,000)
Final Bal. _ --- _ --- _ _ --- _ _ --- _
 Gain Allocation:
A = 20% x (310,000 – 270,000) = 8,000
B = 60% x (310,000 – 270,000) = 24,000
C = 20% x (310,000 – 270,000) = 8,000
Illustration 16: Loss on Realization; No Capital Deficiencies:

Lecture Notes on Fundametals of Accounting-II, Chapter V. 8

A, B, and C are partners with profit-and-loss sharing ratios of 20%, 60%, and 20%, respectively; the
partnership balance sheet consisted of cash of $20,000, non-cash assets of $270,000, liabilities of
$40,000, and capital balances of $140,000 for A, 60,000 for B, and $50,000 for C; the partnership was
liquidated by selling the non-cash assets for $220,000; the partners have sufficient cash to make up
any capital deficiencies.
Required: Show the Liquidation Process and Allocation of the Loss on the Realization.
Non-cash A B C
_ Cash_ _Assets Liab. Capital Capital Capital
BBR 20,000 270,000 40,000 140,000 60,000 50,000
Reali. 220,000 (270,000) - (10,000) (30,000) (10,000)
BAR 240,000 - 40,000 130,000 30,000 40,000
POL (40,000) (40,000) _ _ _
BAPOL 200,000 _ 130,000 30,000 40,000
Final Bal. (200,000) (130,000) (30,000) (40,000)
 Loss Allocation:
A = 20% x (220,000 – 270,000) = (10,000)
B = 60% x (220,000 – 270,000) = (30,000)
C = 20% x (220,000 – 270,000) = (10,000)
Illustration 17:
A, B, and C are partners with profit-and-loss sharing ratios of 20%, 60%, and 20%, respectively; the
partnership balance sheet consisted of cash of $20,000, non-cash assets of $270,000, liabilities of
$40,000, and capital balances of $140,000 for A, $60,000 for B, and $50,000 for C; the partnership
was liquidated by selling the non-cash assets for $160,000; the partners have sufficient cash to make
up any capital deficiencies.
Required: Show the Liquidation Process and Allocation of the Loss on the Realization.
Non-cash A B C
_ Cash_ _Assets Liab. Capital Capital Capital
20,000 270,000 40,000 140,000 60,000 50,000
160,000 (270,000) _ (22,000) (66,000) (22,000)
180,000 --- 40,000 118,000 (6,000) 28,000
(40,000) (40,000) _ _ _
140,000 --- 118,000 (6,000) 28,000
6,000 6,000
146,000 ----
(146,000) (118,000) (28,000)
--- --- ---

 Loss Allocation:
A = 20% x (160,000 – 270,000) = (22,000)
B = 60% x (160,000 – 270,000) = (66,000)
C = 20% x (160,000 – 270,000) = (22,000)
Illustration 18:
A, B, and C are partners with profit and loss sharing ratios of 20%, 60%, and 20%, respectively; the
partnership balance sheet consisted of cash of $20,000, non-cash assets of $270,000, liabilities of
$40,000, and capital balances of $140,000 for A, $60,000 for B, and $50,000 for C; the partnership
was liquidated by selling the non-cash assets for $160,000; the partner B is personally insolvent.
Required: Show the Liquidation Process and Allocation of the Loss on the Realization.
Non-cash A B C
_ Cash_ _Assets Liab. Capital Capital Capital
20,000 270,000 40,000 140,000 60,000 50,000
160,000 (270,000) _ (22,000) (66,000) (22,000)

Lecture Notes on Fundametals of Accounting-II, Chapter V. 9

 180,000 --- 40,000 118,000 (6,000) 28,000
(40,000) (40,000) _ _ _
140,000 --- 118,000 (6,000) 28,000
_ (3,000) 6,000 (3,000)
140,000 115,000 _ 25,000
(140,000) (115,000) (25,000)
--- --- ---
 Loss Allocation:
A = 20% x (160,000 – 270,000) = (22,000)
B = 60% x (160,000 – 270,000) = (66,000)
C = 20% x (160,000 – 270,000) = (22,000)
 B’s Deficit Allocation:
A = [20% / (20% + 20%)] x (6,000) = (3,000)
C = [20% / (20% + 20%)] x (6,000) = (3,000)

Lecture Notes on Fundametals of Accounting-II, Chapter V. 10