Lesson 3 – Partnership Operation
C. Partnership Operations
a. Factors to Consider in Arriving at a Plan for Dividing Profits or Losses
b. Rules for Division of Profits and Losses
c. Correction of Prior Period Error
d. Distribution of Profits or Losses Based on Partners’ Agreement
Partnership Operations
 Accounting for Partnership transactions



The accounting process of partnership operation is basically the similar to other businesses engaged to generate
profits - sole proprietorship and corporations - from journalization up to closing the nominal accounts and
determining the net income.
The difference is that the net income or loss as determined is distributed to the partners in accordance with the
profit and loss agreement.
The Financial Statement are prepared similar to that of a sole proprietorship. The Statement of Changes in
Partner’ Equity shows the details of changes in the partners’ capital and drawing accounts, including the
distribution of partnership profits or losses.
 Profit or loss Distribution



Partnership net income – represents the amount available for distribution to the partners before the
distribution of partners salaries, interest on capital and bonuses.
Profit and loss ratio – the ratio in which partnership profits and losses are divided.
The partnership profit or loss may be distributed using the following rules:
 according to agreement of the partners.

If an agreement does not exist, according to capital contributions (original capital, if cannot be
determined then based on beginning capital of the year). Industrial partners should be given a share in
the profit what is just and equitable under the circumstances.

If only an agreement as to profits exists, losses are distributed according to the profit distribution
agreement. However, industrial partners do not share in the losses of the partnership.
 PROFIT OR LOSS MAY BE DISTRIBUTED ACCORDING TO THE FOLLOWING:
1. Equally
2. Arbitrary ratio
3. Capital Contribution
a. Ending capital balance
b. Beginning capital balance
c. Average capital balance
1. Simple average method
2. Weighted average or peso months method
4. By allowing salaries, interest on capital and/or bonus to the partners and the remainder to be divided
using an arbitrary ratio.

The following points regarding the distribution of partnership profits and losses are important:
1. Payment of salaries should be treated as part of profit distribution.
2. Interest on capitals is treated as part of the distribution of profit.
3. If there is a bonus agreement, determine the basis of the bonus which may be on net income
before deducting bonus or net income after deducting bonus.
4. Bonus is not applicable if the base is negative.
4. Salaries and interest on capital are allowed regardless of whether there is profit or loss.
1. If there is an industrial partner:
a. If there is a profit


he gets the first according to the profit sharing agreement, before the capitalist partners divide the
balance in accordance with the profit or loss agreement.
If there is no specified profit sharing for an industrial partner, he will receive “just and equitable” or
equal to the share of the a capitalist partner having the smallest share.
b. If there is a loss ,

he will share in according to their loss sharing agreement, if any. If there is no
agreement with regards to industrial partner sharing in the loss, he is exempted from
sharing in the partnership loss
6. If there is a capitalist-industrial partner:
a. If there is a profit

he gets the first according to the profit sharing agreement, and another share as a capitalist
partner in accordance with the profit or loss agreement.
.
b. If there is a loss ,

If there is no agreement with regards to industrial partner sharing in the loss, as a capitalist,
loss sharing is in accordance with the profit or loss agreement.
7. Average capital means weighted average or peso months method unless another interpretation of
average capital is specified in the agreement. The weighted average capital method is the best
alternative compared to other capital balances because it provides the most equitable basis for
allocating partnership income by considering additional investments and permanent withdrawals.
STATEMENT OF CHANGES IN PARTNERS’ EQUITY

shows the changes/composition of partners’ capital accounts. It presents in summarized form the following
information.
a)
Beginning balances
b)
Additional investments during the period
c)
Capital withdrawal
d) Share in net income or net loss
e) Personal drawing
Illustrative Problem: (Distribution of Profit or Loss)
The capital accounts of Castro and Diaz show the following facts for the fiscal year ended December 31, 2023.
Castro
Diaz
Jan. 1
Balance
P 260,000 Jan. 1
Balance
P 165,000
Mar. 30
Investment
30,000 May 18
Investment
50000
May 10
Investment
70,000 Aug. 24
Withdrawal
20000
July 25
Withdrawal
40,000 Dec. 31
Balance
195,000
Dec. 31
Balance
320,000
The Income Summary account shows a credit balance of P 240,000 on December 31, 2023.
REQUIRED:
A. Prepare a schedule of profit distribution and journal entries to close the Income Summary account under the following
independent agreements on the division of profits and losses:
1. Equally
2. 2:1 ratio
3. Capital Balances
a) Beginning capital balances
b) Ending capital balances
c) Average capital balances
1. simple average
2. peso months method (weighted average) Investments and withdrawals are to be considered as
made at the beginning of the month if made before the middle of the month, and are to be
considered as made at the beginning of the following month if made after the middle of the month.
4. Interest of 24% on average capitals, salaries to Castro and Diaz of P 72,000 and P 48,000,
respectively and any balance equally. (Investments and withdrawals are to be considered as in 3.c.2.
5. Allowance to Castro of a bonus of 20% of the net profit before bonus, interest of 10% to be allowed
on beginning capitals and any balance in the ratio of 3:2 to Castro and Diaz, respectively.
6. Allowance to Castro of a bonus of 20% of net profit after bonus, interest of 10% to be allowed on
ending capital balances, Annual Salaries to Castro and Diaz of P 80,000 and P 75,000, respectively
and balance divided in equally.
7. Salaries of P 8,000 and P 6,000 a month to Castro and Diaz, respectively, 10% interest on ending
Capital balances, 25% bonus to Castro on net profit after deducting salaries, interest and bonus, any
Balance divided equally.
8. Salaries of P 11,000 and P 10,000 a month to Castro and Diaz, respectively, 10% interest on ending capital
balances, 25% bonus to Castro on net profit after deducting salaries, interest and bonus, any balance divided
equally.
9. Salaries of P 12,000 and P 10,000 a month to Castro and Diaz, respectively, provided annual earnings
are sufficient to cover salary allowance; if earnings are insufficient, the profit shall be distributed in the salary
ratio; if operations result in a loss, it shall be distributed equally.
B. Assuming the Income Summary account shows a debit balance of P 75,000, prepare journal entries and
schedule of profit and loss distribution under req. A – 2 and 7.
C. Prepare a Statement of Changes in Partners’ Equity for req. A. 7.
Solution:
A.1 – Equally
Date
2023
Dec. 31

Particulars
PR
Income Summay
Castro, capital
Diaz, Capital
Profit distributed equally
Debit
Credit
240,000
120,000
120,000
Schedule of profit distribution - equally:
Equally : P 240,000 / 2 = P 120,000
2. Arbitrary ratio : 2:1 ratio
Date
2023
Dec. 31
Particulars
PR
Income Summay
Castro, capital
Diaz, Capital
Profit distributed 2:1 ratio
Debit
Credit
240,000
160,000
80,000
Schedule of profit distribution based on 2:1 ratio:
Castro = 2/3 x P 240,000 = P 160,000
Diaz
= 1/3 x P 240,000 = P 80,000
3. Capital balances:
a) Beginning Capital Balances:
Date
2023
Dec. 31
Particulars
PR
Income Summay
Castro, capital
Diaz, Capital
Profit distributed based on beginning
capital balances.
Debit
Credit
240,000
146,824
93,176
Schedule of profit distribution based on beginning Capital balances:
Castro = 260,000 = 260/425 x 240,000 =
Diaz = 165,000 = 165/425 x 240,000=
425,000
146,824
93,176
240,000
b) Ending Capital balances
Date
2023
Dec. 31
Particulars
Income Summay
Castro, capital
Diaz, Capital
Profit distributed based on ending capital
balances
Schedule of profit distribution based on ending capital balances:
Castro = 320,000 = 320/515 x 240,000 =
Diaz = 195,000 = 195/515 x 240,000 =
515,000
PR
Debit
Credit
240,000
149,126
90,874
149,126
90,874
240,000
c. Average Capital
1. Simple Average:
Date
Particulars
2023
Dec. 31 Income Summay
Castro, capital
Diaz, Capital
Profit distributed based on simple
average capital balances
PR
Debit
240,000
148,085
91,915
Schedule of Profit distribution based on Simple average capital balances:
Castro
Diaz
Balance, January 1
260,000
165,000
December 31
320,000
195,000
Total
580,000
360,000
Simple average capital (Total/2)
Computation:
Castro= 290,000/470,000 x 240,000
Diaz = 180,000/470,000 x 240,000
Profit distributed
Credit
290,000
Total
180,000
470,000
91,915
91,915
140,085
91,915
240,000
148,085
148,085
2. Weighted Average or Peso Months Method
Date
2023
Dec. 31
Particulars
PR
Income Summay
Castro, capital
Diaz, Capital
Profit distributed based on simple
average capital balances
Debit
Credit
240,000
148,085
91,915
Schedule of Profit distribution:
Castro = 312,500 = 312,500/500,000 x 240,000
Diaz
= 187,500 = 187,500/500,000 x 240,000
500,000
=
=
150,000
90,000
240,000
To compute for weighted average capital balances:
Date
1/1
4/1
5/1
8/1
Castro, Capital:
Capital
Balance
Fraction of
Year
Unchanged
260,000
3/12
290,000
1/12
360,000
3/12
320,000
5/12
Average capital
Average
Capital
65,000
24,167
90,000
133,333
312,500
Date
1/1
6/1
9/1
Diaz, Capital :
Fraction of
Year
Unchanged
165,000
5/12
215,000
3/12
195,000
4/12
Average capital
Capital
Balance
Average
Capital
68,750
53,750
65,000
187,500
4. Interest of 24% on average capitals, salaries to Castro and Diaz of P 72,000 and P 48,000, respectively
and any balance equally. (Investments and withdrawals are to be considered as in 3.c.2.
Date
2023
Dec. 31
Particulars
PR
Income Summay
Castro, capital
Diaz, Capital
Profit distribution.
Debit
Credit
240,000
147,000
93,000
Schedule of Profit distribution:
Castro
75,000
72,000
147,000
24% interest on average capital
Salaries
Net income distribution
Diaz
45,000
48,000
93,000
Total
120,000
120,000
240,000
5. Allowance to Castro of a bonus of 20% of the net profit before bonus, interest of 10% to be allowed on
beginning capitals and any balance in the ratio of 3:2 to Castro and Diaz, respectively.
Date
2023
Dec. 31
Particulars
PR
Income Summay
Castro, capital
Diaz, Capital
Profit distribution.
Debit
Credit
240,000
163,700
76,300
Schedule of profit distribution
20% bonus to Castro
10% interest on beginning capital
Balance 3:2

Castro
48,000
26,000
89,700
163,700
Diaz
16,500
59,800
76,300
Total
48,000
42,500
149,500
240,000
To compute bonus = 240,000 x 20% = 48,000
6. Allowance to Castro of a bonus of 20% of net profit after bonus, interest of 10% to be allowed on ending
capital balances, Annual Salaries to Castro and Diaz of P 80,000 and P 75,000, respectively and balance
divided in equally.
Date
Particulars
PR
Debit
Credit
2023
Dec. 31 Income Summay
240,000
Castro, capital
148,750
Diaz, Capital
91,250
Profit distribution.
Schedule of Profit distribution:
20% bonus of net profit after bonus
10% interest on ending cap
Salaries
Balance – equally
Castro
40,000
32,000
80,000
( 3,250)
148,750
To compute bonus: Bonus is 20% of Net income after Bonus:
Net income before bonus
120%
Less: Bonus
20%
Net income after bonus
100%
Net income after bonus = 240,000/120% = P 200,000
Bonus = 200,000 x 20%
=
40,000
Diaz
19,500
75,000
( 3,250)
91,250
Total
40,000
51,500
155,000
( 6,500)
240,000
240,000
40,000
200,000
7. Salaries of P 8,000 and P 6,000 a month to Castro and Diaz, respectively, 10% interest on ending capital
balances, 25% bonus to Castro on net profit after deducting salaries, interest and bonus, any balance
divided equally.
Date
2023
Dec. 31
Particulars
PR
Debit
Income Summay
Castro, capital
Diaz, Capital
Profit distribution.
Credit
240,000
140,300
99,700
Schedule of profit distribution
Castro
96,000
32,000
4,100
8,200
140,300
Salaries
10% interest ending
25% bonus
Balance – equally
Diaz
72,000
19,500
Total
168,000
51,500
4,100
16,400
240,000
8,200
99,700
To compute bonus: Bonus is 25% of Net income after Salaries, interest and Bonus:
Net income before bonus
Less: Salaries
Interest
Net income after salaries and interest but before bonus
Less: Bonus
Net income after bonus
240,000
168,000
51,500
219,500
20,500
4,100
16,400
125%
25%
100%
Net income after salaries and interest but before bonus = 20,500/125% = P 16,400
Bonus = 16,400 x 25%
=
4,100

Base is always equal to 100%
8. Salaries of P 11,000 and P 10,000 a month to Castro and Diaz, respectively, 10% interest on ending capital
balances, 25% bonus to Castro on net profit after deducting salaries, interest and bonus, any balance divided
equally.
Date
2023
Dec. 31
Particulars
PR
Income Summay
Castro, capital
Diaz, Capital
Profit distribution.
Debit
Credit
240,000
132,250
107,750
Schedule of Profit distribution:
Salaries
10% on ending cap.
Balance equally
Castro
132,000
32,000
( 31,750)
132,250
Diaz
120,000
19,500
( 31,750)
107,750
Total
252,000
51,500
( 63,500)
240,000
To compute bonus: Bonus is 20% of Net income after Salaries, interest and Bonus:
Net income before bonus
240,000
Less: Salaries
252,000
Interest
51,500
303,500
Net income after salaries and interest but before bonus
(63,500)

Bonus is not applicable because the base is negative.
9. Salaries of P 12,000 and P 10,000 a month to Castro and Diaz, respectively, provided annual earnings are
sufficient to cover salary allowance; if earnings are insufficient, the profit shall be distributed in the salary
ratio; if operations result in a loss, it shall be distributed equally.
Date
2023
Dec. 31
Particulars
PR
Income Summay
Casto, capital
Diaz, Capital
Profit distribution.
Debit
Credit
240,000
130,909
109,091
Schedule of Profit distribution based on salary ratio:
Castro
131,908
Castro: 144,000/264,000 x 240,000
Diaz: 120,000/264,000 x 240,000
Diaz
Total
130,909
109,091
240,000
109,924
Net income is not sufficient to cover salary allowances:
Castro salary = 12,000 x 12 (12 months)
Diaz, salary = 10,000 x 10 (12 months)
Total Salaries

144,000
120,000
264,000
Net income is not sufficient to cover salary allowances, profit is to be distributed based on
salary ratio.
B. Assuming the Income Summary account shows a debit balance of P 75,000, prepare journal entries and
schedule of profit and loss distribution under req. A - 2 and 7.
A.2. Arbitrary ratio : 2:1 ratio
Date
Particulars
2023
Dec. 31
Castro, capital
Diaz, Capital
Income Summay
Loss distribution
PR
Debit
Credit
50,000
25,000
75,000
Schedule of loss distribution based on 2:1 ratio:
Castro = 2/3 x 75,000 = 50,000
Diaz
= 1/3 x 75,000 = 25,000
A.7 Salaries of P 8,000 and P 6,000 a month to Castro and Diaz, respectively, 10% interest on ending capital
balances, 25% bonus to Castro on net profit after deducting salaries, interest and bonus, any balance
divided equally.
Date
2023
Dec. 31
Particulars
PR
Castro, capital
Diaz, Capital
Income Summay
Profit distributed 2:1 ratio
Debit
19,250
55,750
240,000
Schedule of profit distribution
Salaries
10% interest ending
Balance
Castro
96,000
32,000
(147,250)
( 19,250)
Credit
Diaz
72,000
19,500
(147,250)
( 55,750)
Total
168,000
51,500
(294,500)
(75,000)
C. Prepare a Statement of Changes in Partners’ Equity for req. A. 7.
Castro and Diaz
Statement of Partners’ Equity
For the Year December 31, 2023
Capital balances, January 1, 2019
Add: additional investment
Total
Less: withdrawal
Capital balance before net income distribution
Net income distributed as follows:
Salaries
10% interest ending
25% bonus
Balance – equally
Net share
Capital balances after net income distribution
Less: drawing (amounts assumed)
Capital balances, December 31, 2019
Castro
260,000
100,000
360,000
40,000
320,000
Diaz
165,000
50,000
215,000
20,000
195,000
Total
425,000
150,000
575,000
60,000
515,000
96,000
32,000
4,100
8,200
140,300
460,300
20,000
440,300
72,000
19,500
168,000
51,500
4,100
16,400
240,000
755,000
40,000
715,000
8,200
99,700
294,700
20,000
274,700
General Professional Partnership

Formed for the exercise of profession and usually renders services based on the partners’ acquired profession.
Examples are CPAs, medical doctors, dentists, engineers and lawyers.

Partnership net income is exempted from income tax.

The partners’ distributive shares on the profit of the partnership shall be taxed in their separate and individual
capacities as individual taxpayers.
To illustrate:
Manny and Timmy formed a partnership named MT Partnership with a net income before tax of P 200,000. It was agreed
that the partners should share profits and loss equally.
a) If the partnership is a general partnership
1) To record the tax liability of the partnership ( taxed like a corporation = 30% of taxable income)
Date
Particulars
PR
Debit
Credit
2023
Dec. 31
Income tax expense
60,000
Income tax payable
60,000
Income tax payable.
2) to record the distribution of profit
Date
Particulars
2023
Dec. 31
Income Summary
Manny, capital
Timmy, capital
Profit distribution
PR
Debit
Credit
140,000
70,000
70,000
b) If the partnership is a general professional partnership
1) Exempted from income tax liability
2) to record profit distribution:
Date
Particulars
2023
Dec. 31
Income Summary
Manny, capital
Timmy, capital
Profit distribution
PR
Debit
Credit
200,000
100,000
100,000
Partnership Working Papers and Financial Statements

The principle of preparing the worksheet and financial statements of a partnership is the same as that of the sole
proprietorship except that in the partnership there are more than one accounts representing partner’s capital and
partner’s drawing.
Exercises:
Problem A:
The capital accounts of Blake and Drake partners on December 31, 2023 are shown below:
1/1
4/1
6/1
9/1
Blake Capital:
Debit
Credit
P 72,000
P15,000
20,000
22,000
Drake Capital:
Debit
1/1
2/1
5/1
10/1
Credit
P 108,000
P 16,000
35,000
25,000
Required: Determine the share of each partner and prepare journal entry to close Income Summary account if
Net income for the year is P 106,000 under the following independent agreement:
1. the profit is divided to Bee and Cee on the basis of 1:2 ratio
2 . the profit is divided on the basis of beginning capital ratio:
3. the P/l ratio is based on ending capital ratio
4. the P/l ratio is based on simple average capital:
5. P/l ratio is based on weighted average capital:
6. Assume Blake gets 25% bonus on income before bonus and the balance equally.
7. Assume Blake gets 25% on net income after bonus and balance divided 1:3 ratio
Problem B.
The partnership of Dino and Dante are engaged in trading. Dino’s original capital was P 40,000 and Dante was P 600,000.
They agree to share profits and losses as follows:
Dino
Dante
Annual salaries
P 68,000
P 80,000
As interest on original capital
10%
10%
Bonus on net income after salaries, interest but
before deducting bonus
25%
Remaining profits and losses
30%
70%
Prepare the schedule of profit distribution and journal entry to close Income Summary account for the year ended December
31, 2023, assuming:
1. The Income Summary account shows a credit balance of P 280,000.
2. The Income Summary account shows a credit balance of P 125,000.
3. The Income Summary account shows a debit balance of P 120,000.
Problem C.
Ace, Beni Dani and are partners whose capital accounts with the ABC Partnership as of January 1, 2023 and the subsequent
changes therein are as follows:
Ace
Beni
Dani
Jan. 1, 2023
Additional Investment
Withdrawals
P 300,000
200,000
150,000
P 210,000
120,000
100,000
P 90,000
160,000
50,000
Net income for 2023 amounts to P 323,000 and per agreement, this is to be distributed as follows: Salary allowance of
P10,000 per month to Ace and P 7,000 per month to Beni, 10% interest on beginning capital balances, 20% bonus to Ace
on net income before interest but after salaries and bonus, remainder to be divided in the ratio of 2:2:1 between Ace. Beni
and Dan, respectively. The temporary withdrawals of Ace, Beni and Dani were P 75,000, P 50,000 and P 35,000, respectively.
REQ: Prepare the statement of Partners’ Capital.
Unit I – Partnership Operation
Lesson C – Partnership Operation
Activity 2 – Multiple Choice Problems. Answers must be supported with computation.
1. C, D and E share in the partnership’s profit and losses in the ratio of 3:4:5. During the year, the partnership’s
distributive income is P 1,500,000. What is the amount of E’s share from the partnership’s income?
a) P 750,000
b) P 625,000
c) P 500,000
d) P 125,000
2. A and B share in the partnership’s profit in the ratio of 2:1, respectively. A received P 245,000 as his share.
How much di B receive as his share?
a) P 367,000
b) P 245,000
c) P 122,500
d) P 122,000
3 After closing the nominal accounts on December 31, 2023, the Income Summary account shows a debit
balance of P200,000. If partners D, E and F have income ratios of 50%, 30% and 20%, respectively, how
much is the share of F from the net income (loss) of the partnership?
a) 60,000
b) P 40,000
c) P (40,000)
d) (P 100,000)
for 4 – 5:
X, Y and Z, a partnership formed on January 1, 2023 had the following initial investment:
X
P 100,000
Y
150,000
Z
225,000
The partnership agreement states that the profits and losses are to be shared equally by the partners after
Consideration is made for the following:
 Salaries allowed to partners: P 60,000 for X, P 48,000 for Y and P 36,000 for Z.
 Average partners’ capital balances during the year shall be allowed 10%.
Additional information:
 On June 30, 2020, X invested an additional P 60,000.
 ZZ withdrew P 70,000 from the partnership on September 30, 2020
 Share on the remaining partnership profit was P 5,000 for each partner.
4. Interest on average capital balances of the partners totaled:
a) P 53,750
b) P 48,750
c) P 60,625
d) P 57,625
5. Partnership net profit at December 31, 2023 before salaries, interests and partners’ share on the remainder was:
a) P 207,750
b) P 199,750
c) P 211,625
d) P 222,750
6. Total assets before partnership formation are P 800,000 and MM’s assets are P 450,000. Total liabilities before
partnership formation are P 400,000 and NN’s liabilities are P 175,000. They decided to become partners on
January 1, 2023. They agreed on the following adjustments: NN’s assets are understated by P 15,000 and there is a
note payable that he wants to settle outside of the partnership agreement which is still included in his books amounting
to P 13,000. On the other hand, MM has and accounts receivable with an overvalued allowance for bad debts for
P 12,000.During the year NN withdrew P 17,000 on March 21 and made investment of P 35,000 on August 8, while MM
made an investment of P 55,000 on April 8 and made another investment of P 12,500 on November 14. For the year, the
partnership had a credit balance in the income summary account of P 450,000. They also agreed that the net income or
loss should be distributed as follows: 8% interest on the beginning capital and the remainder will be shared in the ratio 2:3
for MM and NN respectively. The net income is earned or net loss is incurred evenly during the year.
How much is the ending capital of MM on December 31, 2023:
a) P 504,760
b) P 489,380
c) P 486,120
d) P 463,460
7. On January 2, 2023, BB and EE formed a partnership. BB contributed capital of P 175,000 and EE, P 25,000. They
agreed to share profits and losses 80% and 20%, respectively. EE is the general manager and works in the partnership
full time and is given a salary of P 5,000 a month; an interest of 5% of the beginning capital (of both partners) and a
bonus of 15% of net income before the salary, interest and bonus. The profit and loss statement of the partnership for the
year ended December 31, 2023 is as follows:
Net Sales
Cost of good sold
Gross Profit
Expenses ( including salary, interest and bonus)
Net income
The amount of bonus to EE amounted to:
a) P 13,304
b) P 16,456
P 875,000
700,000
P 175,000
143,000
P 32,000
c) P 18,000
d) P 20,700
8. Helen and Fenny are partners operating grocery store. Their partnership agreement requires that profits and
losses be divided as follows:
Helen
Fenny
Salaries
P 20,000
None
Commission on gross sales
None
2%
Interest on average capital balances
8%
8%
Bonus
20% of net income before
None
commission and interest but
after salaries and bonus
Remainder
60%
40%
Gross Sales for 2023 were P 1,250,000. Income before deducting amounts for salary, commission, interest and bonus were
P200,000. Average capital balances of Helen and Fenny are P 400,000 and P420,000 respectively. What are the profit
share of Helen and Fenny respectively?
a) P 117,640 and P 82,360
b) P 35,460 and P 23,760
c) P 110,640 and P 89,360
d) P 117,460 and P 82,540
9. Dan, Jerry and Fred form a partnership and agree to maintain average investments of P 2,500,000, P1,250,000 and
P 1,250,000, respectively. The partners agree to divide profits and losses as follows:


Interest of 6% on the excess or deficiency in the capital investments
Remainder to shared in the ratio of 5:3:2 to Dan, Jerry and Fred, respectively.
Average investments made during the first six months were as follows: Dan, P 3,000,000; Jerry, P1,375,000;
Fred, P 1,000,000. A loss from operations of P 62,500 was incurred for the first six months. How is this loss
distributed among the partners?
Dan
a) P 21,875
b) 12,500
Jerry
P 18,375
10,000
Fred
P 22,250
48,500
c)
d)
Dan
P 31,250
18,375
Jerry
P 18,750
21,875
Fred
P 12,500
22,250
10. On December 31, 2023, the total partnership capital for GDK partnership is P 422,000. Selected information
related to the pre-closing capital balance is as follows:
Gee
P 140,000
Balance, January 1
Investment, 2023
Withdrawals, 2023
Drawings, 2023
P
(30,000)
(10,000)
100,000
How much is the partnership net income during the year?
a) P 72,000
b) P 102,000
Dee
P 100,000
20,000
(10,000)
P 110,000
c) P 42,000
Kay
P 160,000
20,000
(30,000)
(10,000)
P 140,000
Total
P 400,000
40,000
(60,000)
(30,000)
P 350,000
d) P 22,000