Answer to Question #268762 in Financial Math for VIK

Question

John and Jane are in partnership sharing profits and losses in the ratio 3:1. Interest is allowed at 5% on their capital balances and interest on drawings is charged as follows; John Tshs.120,000; Jane Tshs.130,000. The partnership agreement provides salaries to partners for the whole year as follows; John Tshs.1,200,000; Jane Tshs. 960,000. The trial balance as at 30^th June, 2017 is as shown below;

Answer 1

You can share earnings whatever you wish in a company venture, with one caveat: all firm stakeholders must decide on profit-sharing. You can opt to share the gains evenly between the parties, or each partner can earn a separate basic pay and then distribute any residual profits.

Profits and losses are handed directly to the stakeholders in a standard collaboration, a confined obligation partnership, a limited liability limited partnership, and a limited partner, as stipulated in the strategic alliance agreement. If gains and losses are not mentioned, earnings and losses are distributed fairly amongst the proprietors.

Total Revenue - Total Expenses = Profit is the formula for computing profitability. Profit is calculated by deducting all direct and incidental costs from total sales. Items such as commodities and employee compensation are examples of direct expenses.