1. Example (8)
On 1 Jan 2011, A ,B and C formed a general partnership. The partnership realized net income of 200,000 for the year ended 31/12/2011. According to the partnership agreement the net income is allocated as follows:
1) Calculating interest on capital balances with a rate of 10%and the balances of the partners were , and respectively.
2) Calculating salary to partner B of 1000 monthly and partner C of annually .
3) Calculating bonus to partner A of 5% of the net income.
4)The rest of profits and losses is allocated with a ratio of 1:4:2 respectively.
Required:
Prepare the journal entry to record the allocation of profit.

2. Solution We prepare the statement of distribution as follows:
Title
Partner A
Partner B
Partner C
Total
Net income
200000
1) Interest on capital
20000
40000
30000
( (90000
The remainder
110000
2) Salary of partner B&C
12000
18000
(30000)
80000
3) Bonus of partner A
10000
(10000)
70000
3) Allocating the rest (1:4:2)
(70000)
The partner’s share
92000
68000

3. First: The calculations: 1) Interest on capital = The partner’s capital balance * % of interest Partner, A = * 10% = Partner, B = * 10% = Partner, C = * 10% = ) The salary of partner B & C : We calculate the annual salary = 1000 monthly * 12 = But we have the annual salary of partner C = ) The bonus of partner A: The bonus = {The net income }* % of bonus = * 5% = ) Allocating the rest of the net income: A B C Total = 7 The share of A = * ( 1/7) = The share of B = * ( 4/7) = The share of C = * ( 2/7) = 20000

4. Second: the entry:
We prepare the entry by the amounts from the statement.
Dr Cr
Income Summary
Partner-A- Capital
Partner-B- Capital
Partner-C- Capital

5. Example (9)
On 1 Jan 2011, A ,B and C formed a general partnership. The partnership realized net income of 95,000 for the year ended 31/12/2011. According to the partnership agreement the net income is allocated as follows:
1) Calculating interest on capital balances with a rate of 10%and the balances of the partners were , and respectively.
2) Calculating salary to partner B of 1000 monthly and partner C of annually .
3) Calculating bonus to partner A of
4)The rest of profits and losses is allocated with a ratio 1:4:2 respectively.
Required:
Prepare the journal entry to record the allocation of profit

6. Solution We prepare the statement of distribution as follows:
Title
Partner A
Partner B
Partner C
Total
Net income
95000
1) Interest on capital
20000
40000
30000
( (90000
The remainder
5000
2) Salary of partner B&C
12000
18000
(30000)
(25000)
3) Bonus of partner A
10000
(10000)
(35000)
3) Allocating the rest (1:4:2)
(5000)
(20000 )
(10000 )
The partner’s share
25000
32000
38000

7. First: The calculations: 1) Interest on capital = The partner’s capital balance * % of interest Partner, A = * 10% = Partner, B = * 10% = Partner, C = * 10% = ) The salary of partner B & C : We calculate the annual salary = 1000 monthly * 12 = But we have the annual salary of partner C = ) The bonus of partner A: The bonus = ( given) 4) Allocating the rest: A B C Total = 7 The share of A = (35000) * ( 1/7) = ( 5000) The share of B = ( 35000) * ( 4/7) = (20000) The share of C = (35000) * ( 2/7) = (10000)

8. Second: the entry:
We prepare the entry by the amounts from the statement.
Dr Cr
Income Summary
Partner-A- Capital
Partner-B- Capital
Partner-C- Capital

9. Example (10)
On 1 Jan 2011, A ,B and C formed a general partnership. The partnership realized net Loss of 55,000 for the year ended 31/12/2011. According to the partnership agreement the net income is allocated as follows:
1) Calculating interest on capital balances with a rate of 10%and the balances of the partners were , and respectively.
2) Calculating salary to partner B of 1000 monthly and partner C of annually .
3) Calculating bonus to partner A of 5% of the net income.
4)The rest of profits and losses is allocated with a ratio 1:4:2 respectively
Required:
Prepare the journal entry to record the allocation of net loss.

10. Solution We prepare the statement of distribution as follows:
Title
Partner A
Partner B
Partner C
Total
Net Loss
(55000)
1) Interest on capital
20000
40000
30000
( (90000
The remainder
( )
2) Salary of partner B&C
12000
18000
(30000)
(175000)
3) Allocating the rest (1:4:2)
(25000)
( )
(50000 )
The partner’s share
(5000)
(48000)
(2000)

11. First: The calculations: We calculate the interest and salaries regardless the company realized net income or net loss but we calculate the bonus only when it realizes net income. 1) Interest on capital ; = The partner’s capital balance * % of interest Partner, A = * 10% = Partner, B = * 10% = Partner, C = * 10% = ) The salary of partner B & C : We calculate the annual salary = 1000 monthly * 12 = But we have the annual salary of partner C = ) The bonus of partner A: No bonus to the partner A 4) Allocating the rest : A B C Total = 7 The share of A = (175000) * ( 1/7) = ( 25000) The share of B = ( ) * ( 4/7) = (100000) The share of C = (175000) * ( 2/7) = (50000)

12. Second: the entry:
We prepare the entry by the amounts from the statement.
Dr Cr
Partner-A- Capital
Partner-B- Capital
Partner-C- Capital
Income Summary

13. The drawings of the partners :
The partners may agree that each of them can withdraw an amount in cash. Here we prepare the following entries: 1) Recording the drawings: At every time when the partner withdraws , the entry is: Partner (--) Drawings xx Cash xx 2) Closing the drawings: At the end of the year by the total of drawings we prepare the following entry: Partner (--) Capital xx Partner (--) Drawings xx

14. Partner’s Loan to the company:
If the partner lends a loan to a company, we prepare the following entries : 1) Recording the loan : Cash xx Partner (--) Loan xx 2) When the company returns the money to the partner :

15. Example The drawings of partner A during the year were the following:
1- On April, 15 of 6000 cash.
2- On July, 1 of 4000 cash .
Required : Prepare the journal entries.
Solution
1) Recording the drawings April, 15 :
Partner (A) Drawings
Cash
2) Recording the drawings July, 1 :
Partner (A) Drawings
Cash
2) Closing the total of drawings Dec., 31:
Partner (A) Capital
Partner (A) Drawings
(The total of drawings= = )