18 Questions
If there is no agreement on profit and loss sharing, how should losses be distributed to capitalist partners?
Divided proportionately according to the capital contribution ratio
In the absence of agreement on loss sharing, how does a capitalist-industrial partner share in partnership losses?
Not share in losses as an industrial partner, but share based on profit ratio as a capitalist partner
Which of the following stipulations in profit or loss sharing would be valid?
Excluding a capitalist partner from loss sharing
If C and I entered into a partnership for two years, with C as the capitalist partner and I as the industrial partner, what terms did they agree on for profit or loss sharing?
Profit or loss sharing as per their agreement
In a partnership, if there is no agreement on the distribution of profits, what determines how profits are shared among partners?
Proportionate distribution according to the capital contribution ratio
When a partnership agreement does not specify how profits are to be shared, what method is typically used for distributing profits?
According to the investment made by each partner
In the absence of an agreement on sharing profits, how shall a capitalist-industrial partner share in partnership profits?
He shall receive a just and equitable share in the profit for being an industrial partner and then he shall also share in the remaining profits as a capitalist partner on the basis of capital contribution ratio.
If there is no agreement on sharing losses, how shall an industrial partner share in the losses?
The industrial partner shall not share in the losses.
How should losses be distributed to capitalist partners in the absence of an agreement?
It should be divided proportionately in accordance to the capital contribution ratio.
What happens if there is no explicit agreement on profit sharing terms in a partnership?
Partners receive equal shares in profits.
How does an industrial partner typically benefit from sharing profits in a partnership?
By receiving a just and equitable share based on services provided.
If a partnership agreement does not specify how cumulative profits should be handled, what is most likely to occur?
Cumulative profits are equally split between partners.
What is the total net income for the two years of partnership operation?
P20,000
In this partnership, why is there no agreement as to losses?
The partners assumed that only profits would be shared.
What would happen if a third party's designation of share in profits and losses is found to be manifestly inequitable?
It can no longer be questioned by a partner executing it.
If a partnership agreement designates shares in both profit and loss to a third person, what is the impact on the partners?
Partners can no longer question the designation.
Why did the industrial partner receive P20,000 for the two years of partnership operation?
The losses from 2010 were offset against the income from 2011.
What is the implication of an industrial partner not sharing in losses according to the partnership agreement?
The industrial partner has limited liability in terms of losses.
Study Notes
Partnership Profit and Loss Sharing
- In the absence of an agreement, losses are distributed equally among partners.
- Without an agreement, profits are typically distributed equally among partners.
- If there is no agreement on profit sharing, the partners will share equally.
- In the absence of an agreement, an industrial partner shares equally in partnership profits.
- A capitalist partner shares equally in partnership losses if there is no agreement.
- If a partnership agreement does not specify how profits are to be shared, the partners share equally.
- If there is no agreement on sharing losses, the industrial partner shares equally in the losses.
- Without an agreement, losses are distributed equally among capitalist partners.
- If a partnership agreement does not specify how cumulative profits should be handled, the partners share equally.
- If a third party's designation of share in profits and losses is found to be manifestly inequitable, it may be reconsidered.
- If a partnership agreement designates shares in both profit and loss to a third person, the third person becomes a partner.
- If an industrial partner does not share in losses according to the partnership agreement, it implies they are not liable for losses.
- In the given partnership, the industrial partner received P20,000 for the two years of partnership operation, indicating they shared in profits but not in losses.
Test your knowledge on partnership profit sharing by calculating the share received by a partner based on given partnership performance. Determine the correct share for the partner over two years of operation based on the agreement and net income/loss figures.
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