Chapter 1 PTX2053/Partnership

CHAPTER 1

PARTNERSHIP
partnership = company
partner = individu yg urus company tersebut

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Chapter 1 PTX2053/Partnership
1.0 INTRODUCTION
kena 2 org dan lebih
Partnership is define as an association of any kind between parties who have agreed to combined
any of their rights, power, property, labour or skill for the purposes of carrying on a business and
sharing profit.

2.0 CHARGEABLE PERSON

Partnership is not a chargeable person for income tax purpose. Income tax is levied on the
individual partner on their share of business income.

3.0 ASSESSMENT OF PARTNERSHIP BUSINESS INCOME.

3.1 Provisional Adjusted Income
A partnership is presumed to be a sole proprietorship for the purposed of computing
partnership adjusted income. It is also known as ‘provisional adjusted income’.

3.2 Divisible income

The basis to apportion the partnership income to individual partners is based on the
profit sharing ration as stipulated in the partnerships agreement.

3.2.1 Change of profit sharing ratio

The divisible income is presumed to accrue evenly over the basis period YA. If there
is a change of profit sharing ratio among partners during the basis period, an
apportionment of DI on time basis will be carried out.(refer Q 2)

3.3 Adjusted income

The divisible income will be divided among partners based on their respective profit
sharing ratio. The partners’ expenses however would be allocated to the respective
partner in accordance with their actual consumption. The aggregate of divisible
income and partner’s private expenses would be the adjusted income of the
partner.

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Chapter 1 PTX2053/Partnership
4.0 CHANGES IN THE PARTNERSHIP
When a partner withdrew from the partnership or a new person is admitted as partner into
the existing partnership, this would tantamount to a cessation of old partnership and
commencement of new partnership.

4.1 New partnership

A new business (partnership) is said to exist if:
a) The old partnership ceased business on the last day of a 12 month period;
b) New partnership took over the business of the old partnership, also prepared its
account for a 12 month period

4.2 Continuing partnership

Where there is a change or changes in the partners of a partnership and there is at least a
partner in the old partnership want to continue the business, partnership is treated as
continuing even though the change takes place half way through the accounting year.

4.3 Admission of new partner

Where a new partner is admitted into the existing partnership and the business is continues
to prepare its account to its normal year end.

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Chapter 1 PTX2053/Partnership
FORMAT - COMPUTATION OF STATUTORY INCOME
 Stage 1 - Computation of Provisional Adjusted Income
RM RM
Net profit per the partnership P/L account XXX
Less : Others Income
Dividend X
Interest X
Rental X (XX)
Add : Non Allowable expenses
Depreciation X
General provisional of doubtful debts X
Unapproved donation X
Approved donation X XX

Add : Partnership private expenses

Salary/Bonus X
Interest on capital X
Any private/domestic expenses X
XX
Provisional Adjusted Income XXX

 Stage 2 - Computation of Divisible Income

RM RM
Provisional Adjusted Income XXX

Less : Partnership private expenses

Salary/Bonus (X)
Interest on capital (X)
Any private/domestic expenses (X) (XX)
Divisible Income XXX

 Stage 3 - Computation of Adjusted Income for EACH partner

RM RM Total
Divisible Income
- will be divided among partners based on their respective profit sharing ratio

Partner 1 Partner 2
Divisible Income for each partner
Pre: based on profit sharing ratio XX XX
Post: XX XX XXX
Add : Partnership private expenses
Salary/Bonus X X XX
Interest on capital X X XX
Food/Traveling allowance X X XX

Adjusted Income XXX

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Chapter 1 PTX2053/Partnership

 Stage 4 - Computation of Statutory Income for EACH partner

Partner’s statutory income

Partner 1 Partner 2
Adjusted Income XXX XXX
(+) Balancing Charge * xx xx
XXX XXX
(-) Capital Allowance * (xx) (xx)
Statutory Income XXX XXX

* CAPITAL ALLOWANCE / BALANCING CHARGE

Capital allowances and balancing charge claim is attributable to the individual partners instead of
the partnership. The capital allowance and balancing charge is allocated with reference to the
profit sharing ratio of the partner at the end of each basis period.
Since capital allowance and balancing charge was compute at the end of the year, new partner will
enjoyed full year capital allowance and balancing charge while retired partner would not get any
capital allowance and balancing charge in the year of withdrawal.

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Chapter 1 PTX2053/Partnership

TUTORIAL
QUESTION 1

Kleen Wash is a partnership firm operating a laundry business owned by Dany and Diana. The
business accounting year end is on 31 December each year. The terms of their agreement are as
follows:
a) Each partner should maintain a fixed capital of RM250,000.
b) Interest on capital was 9% per annum.
c) Profit and loss was to be shared equally.

As their business expanded, they decided to admit a new partner, Danial in order to raise additional
capital. With the admission of the new partner on 1 September 2021 their new partnership
agreements are follows:

a) Capital contributed by Dany, Diana remained the same and Danial agreed to contribute
RM350,000.
b) Interest on capital is to be increased to 12% per annum.
c) Profit and loss sharing ratio between Dany, Diana and Danial is 3:3:2 respectively.

Additional information:
1. Partnership business: RM
Provisional adjusted income 233,300 STAGE 1

Capital allowances 35,000

Balancing charges 6,000

2. Partners expenses (PPE) STAGE 2

Dany Diana Danial

RM RM RM
Salary (monthly) 2,500 3,000 1,500 1/9 - 31/12 = 4months

Food allowance 6,000 15,000 -

Travelling allowance 3,000 3,000 2,000

Required:
Compute the adjusted income/statutory income for each partner for the year assessment 2021.

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Chapter 1 PTX2053/Partnership
QUESTION 2

Ryukorian Enterprise which is based in Kudat is a partnership between Ryu, Miko and Andrian, who
share profit equally. The income statement of Ryukorian Enterprise for the year ended 31
December 2021 is as follows:
RM RM
Sales revenue 600,000
Add: Gain on disposal of machinery 10,200
610,200
Less: Expenses
Staff salaries 100,000
Revenue expenses 161,500
Partner’s life insurance premiums 9,000
Partner’s interest on capital 5,000
Partner’s salaries 60,000 (335,500)
Net profit 274,700

Additional information:
1) Each partner contributed RM25,000 as their capital. Interest is payable at 5% per annum
based on the amount of capital contributed. Ryu and Miko are also entitled to get a monthly
Capital = RM25,000 each
salary of RM2,500 each. Interest on capital = 5% per annum
Salary = RM2,500
2) On 1 July 2021, Miko and Andrian agreed to increase their capital contribution to RM50,000
Capital = RM50,000 each
each. The new profit and loss sharing ratio is 2:4:4 but other terms remain the same.Ratio = 2:4:4
3) The business also paid RM3,000 personal life insurance premium per annum for each partner
and the capital allowances available to the business for the year of assessment 2021 are
personal life insurance = RM3,000 each
RM15,000. Capital Allowances = RM15,000

Required:
Compute the statutory income for each partner for the year assessment 2021.

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Chapter 1 PTX2053/Partnership
QUESTION 3

Seri Cookies is a partnership business between Aqil, Farhan and Salwa, who share profits equally.
They have been partners since 2007. The accounting year ended on 31st December each year. The
income statement for the year ended 31 December 2021 is as follows:

RM RM
Sales 550,000
Add: Dividend 10,200
560,200
Less: Expenses
Staff salaries 100,000
Packaging materials 63,100
Shop Rental 36,000
Depreciation 12,400
Partner’s life insurance premium 9,000
Partner’s interest on capital 6,000
Partner’s salaries 67,200 (293,700)
Net Income 266,500

Additional information:

1) Each partner contributed RM35,000 as their capital. Interest is payable 5% per annum based
on the amount of capital contributed. Aqil and Farhan are also entitled to get a monthly
salary of RM2,800 each.

2) On 1 July 2021, Farhan and Salwa agreed to increase their capital contribution to RM50,000
each. The new profit and loss sharing ratio is 2:4:4 but other terms remain the same.

3) The business also paid RM3,000 personal life insurance per annum for each partner. The
balancing charge and capital allowance available to the business for the year of assessment
2021 are RM8,000 and RM15,000 respectively.

Required:

Compute the statutory income for each partner for the year of assessment 2021. (Show all
calculation)

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Chapter 1 PTX2053/Partnership

QUESTION 4

NY & Partners has been established since 2010. The partnership business is currently owned by
Naim and Faizal. The following are the terms of partnership agreement:

Naim Faizal
Capital contribution RM50,000 RM50,000
Interest on capital (per annum) 5% 5%
Salary (per month) RM2,000 RM2,400
Profit/loss sharing ratio 1/3 2/3
Personal expenses (per annum) RM5,000 RM5,000

On 1 August 2021, Zakuan was admitted as a new partner. His capital contribution was RM45,000
and the interest on capital ( per annum) is 5%, while monthly salary is RM2,000. The new profit
sharing ratio is 1:2:1, between Naim, Faizal and Zakuan, while the others remain unchanged.
The provisional adjusted income for the year ending 31 December 2021 was RM158,000.

Required to compute the adjusted income/statutory income for Naim, Faizal and Zakuan from
the partnership for year assessment 2021.

QUESTION 5

Hadi, Isa and Zaid form a partnership. However, due to some misunderstanding, Zaid left the
partnership on 30 September 2021 and withdrew all his capital contribution from the partnership.
stage 3
At the end of the basis period, the partnership has a divisible income of RM116,925. The
partnership closes its account on 31 December annually.
Below is the information regarding the partnership:
12 month
a) Hadi and Isa were paid a monthly salary of RM3,000 each while Zaid was paid RM2,000
monthly. 9/12

b) Hadi and Isa contributed RM30,000 as capital respectively while Zaid contributed
RM15,000.
c) Izwan joined the partnership immediately after Zaid left. He contributed a capital of
RM40,000. The partnership paid him a monthly salary of RM3,000. 3/12

d) Capital allowance claimed was RM4,800 including RM1,500 on Hadi’s personal car being
used in the partnership. capital allowances = 4,800 - 1,500 = 3,300

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Chapter 1 PTX2053/Partnership
e) Before and after the change in partnership:
i) The interest rate on capital remains the same, which is 10%p.a.
ii) Profit sharing ratio was based on the amount of capital contribution in the
partnership before - 2:2:1
after - 3:3:4

Required to compute the adjusted income/statutory income for Hadi, Isa, Zaid and Izwan from
the partnership for year assessment 2021.

QUESTION 6

Kahuba Enterprise is a partnership business owned by Nadia and Zira since 2010. They are partners
in an event management business, each of them contributed capital in the amount of RM250,000
and RM200,000 respectively. The accounting year end of the business is 31 December each year.

The terms of their agreement are as follows:

Nadia Zira
Profit/loss sharing ratios As per capital As per capital 5:4
contribution contribution
Interest rate on capital 5% per annum 5% per annum
contribution
Annual salary RM65,000 RM54,800
Annual entertainment allowance RM12,400 RM10,600
Annual travelling allowance RM18,000 RM15,000

Additional information:

1) The provisional adjusted income for the year ended 31 December 2021 was RM485,000. stage 1
2) The capital allowance on the business assets for the year of assessment 2021 were RM35,000.
3) Zira brought in an additional capital of RM50,000 on 1 September 2021.

200,000 + 50,000 = 250,000 so sama dgn nadia.

Required:
Compute the statutory income for Nadia and Zira for year assessment 2021.

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Chapter 1 PTX2053/Partnership

QUESTION 7

Putih Enterprise is a partnership business owned by Diana, Syafiq and Afiq since 2015. They are
partners in a catering business, each of them contributed capital in the amount of RM140,000,
RM80,000 and RM200,000 respectively. The accounting year end of the business is 31 December
each year. The terms of their agreement are as follows:

Diana Syafiq Afiq

Profit/loss sharing ratios 2 1 2

Interest rate on capital 5% per annum 5% per annum 5% per annum

Annual salary RM62,400 RM36,000 RM48,000

On 1 July 2021, Syafiq withdraw from the partnership and Johan was join the partnership with a
capital contribution RM180,000. The terms of their agreement are as follows:

Diana Johan Afiq

Profit/loss sharing ratios 1 1 2

Interest rate on capital 15% per annum 15% per annum 15% per annum

Annual salary RM62,400 RM38,400 RM48,000

Additional information:
4) The provisional adjusted income for the year ended 31 December 2021 was RM300,000.
stage 1
5) The capital allowance and balancing charge on the business assets for the year of assessment
2021 were RM3,000 and RM8,400 respectively.
using ratio 1:1:2

Required:

Compute the total income for Diana, Syafiq, Afiq and Johan for the year assessment 2021.

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Chapter 1 PTX2053/Partnership
QUESTION 8

Al-Hikmah & Partners is a partnership business started on May 2015, owned by Auni, Raihan and
Anis. At the beginning of the business, each of them contributed capital worth RM200,000,
RM175,000 and RM150,000 respectively. The accounting year ended on 31st December each year.
The partnership terms were as follows:

a) Auni were paid a salary of RM48,000 per year because she gives full commitment in the
company while Raihan will received half of Auni’s salary and Anis was paid RM1,500 per
month.
b) Interest on capital was 10% per annum.
c) Profit sharing ratio is 4:3:1

On 31st October 2021, Anis decided to leave the partnership because of she will migrate to Australia
with her family. Due to the withdrawal, Auni brings in RM50,000 cash as additional capital and
Raihan increase her capital to RM200,000. The new terms are as follows:

a) Interest on capital is to be increased to 12% per annum.

b) Profit sharing ratio between Auni and Raihan is 2:1.

Additional information:

4) The provisional adjusted income for the year ended 31st December 2021 is RM288,200.
5) The capital allowance and balancing charge on the business assets for the year assessment
2021 were RM 40,000 and RM12,000 respectively.
6) The business also paid RM3,600 and RM1,800 personal life insurance for Auni and Raihan.

Required:

Compute the statutory income for each Al- Hakim & Co partners for year assessment 2021. (Show
all calculation)

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