A partnership begins its first year of operations with the following capital balances: Allegan, Capital $60,000 Berrien, Capital 50,000 Kent, Capital 60,000 According to the articles of partnership, all profits will be assigned as follows: ⚫ Allegan will be awarded an annual salary of $20,000 with $10,000 assigned to Kent. ⚫ The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year. ⚫ The remainder will be assigned on a 5:2:3 basis, respectively. • Each partner is allowed to withdraw up to $8,000 per year. The net loss for the first year of operations is $24,000, and net income for the subsequent year is $29,000. Each partner withdraws the maximum amount from the business each period. Required: Prepare schedules that compute the balances in each partner's capital account at the end of each of the first two years of partnership operations.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
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