1. Methods of Dividing Profit and Loss
Arbitrary Ratio (any agreed ratio)
Capital Ratio Based on any of the following:
Initial or original capital
Beginning yearly capital
Ending yearly capital
Average Capital
Interest on investments, balance in an agreed ratio

2. METHODS OF DIVIDING PROFIT AND LOSS
4. Salaries to partners, balance in an agreed ratio
5. Interest on investments, salaries to partners, balance in an agreed ratio
6. Interest on investments, salaries to partners, bonus to managing partner, balance in an agreed ratio. Where bonus is expressed as:
A distribution of profit (certain percentage of income)
An expense (a certain percent of net income after bonus)

3. GIVEN: A, Capital P300,000
B, Capital ,000
C, Capital ,000
Net Income P90,
Arbitrary Ratio ( 3:2:1)
A, Drawing (3/6 x 90,000) P45,000
B, Drawing (2/6 x 90,000) ,000
C, Drawing (1/6 x 90,000) ,000
GIVEN:
A,CAPITAL B,CAPITAL
Jan , ,000
Apr ,000
Jun ,000
Oct (200,000)
Net Income P300,000

4. 1.a) Initial or Beginning Capital
Income & Expense Summary P300,000.00
A,Drawing (300/500 x P300,000) P180,000.00
B, Drawing (200/500 x P300,000) ,000.00
b) Ending Ratio
Income & Expense Summary ,000.00
A, Drawing (350/600 x P300,000) P175,000.00
B,Drawing (250/600 x P300, ,000.00
c) Average Capital
A,Capital / , x 6mos ,800,000
6/ , x 3mos ,650,000
10/ , x 3 mos ,050,000
Total ,500,000
Dividend by 12 months ,000

5. B, Capital / , x mos ,000
4/ , x mos ,250,000
Total ,850,000
Divided by 12 mos ,500
INTEREST ON PARTNERS CONTRIBUTION
BALANCE DISTRIBUTED IN AN AGREED RATIO
GIVEN: A, CAPITAL , B,CAPITAL ,000
NET INCOME : P300, INTEREST 12% RATIO 2:1
A,DRAWING B,DRAWING
12% interest on capital
(12% x 350,000) ,000
(12% x 250,000) ,000
Balance at 2:1
(2/3 x 228,000) ,000
(1/3 x 228,000) ,000
TOTAL , ,000
Income and Expense Summary 300,000
A, Drawing ,000
B, Drawing ,000

6. Case 2 Net Income is P60,000
A, Drawing B,Drawing
12% interest on Contribution
(12% x 350,000) ,000
(12% x 250,000) ,000
Balance based ib 2:1
(2/3 x 12,000) ( 8,000)
(1/3 x 12,000) ( 4,000)
TOTAL , ,000
ENTRY :
Income and Expense Summary ,000
A, Drawing ,000
B, Drawing ,000
To distribute interest to partners.
A,Drawing ,000
B, Drawing ,000
Income and Expense Summary ,000
To distribute the remaining profit based on arbitrary ratio.

7. COMBINATION OF INTEREST AND SALARIES, BALANCE IN AN AGREED RATIO
Case 3 : A, Capital P500, B, Capital P300,000
P&L ratio agreement : 12% Interest on Capital balances,
Salary of 15,000 per month to B
Balance to be divided equally
NET LOSS P24,000
A, Drawing B,Drawing Total
12% Interest on capital 60, , ,000
Salary to B 15,000 per month , ,000
Balance equally
(P300,000/2) (150,000) (150,000) (300,000)
Total (90,000) P66, P 24,000
Entries:
Income and Expense Summary ,000
A, Drawing 60,000
B,Drawing ,000

8. Income and Expense Summary 180,000
B, Drawing ,000
A,Drawing 150,000
B,Drawing 150,000
Income and Expense Summary 300,000