Franciscan College of the Immaculate Conception,

Baybay, Leyte, Incorporated

Baybay City 6521, Leyte
Philippines

COLLEGE OF BUSINESS MANAGEMENT AND ADMINISTRATION

Module 2
ACTIVITY 2

Accounting 12
Accounting for Partnership and Corporation

Name: LARA JOY REAS BSOA - 1

Course: Accounting 12
Deadline- March 10, 2022
Teacher: Sister M. Emilie Igano, OSF

ACADEMIC YEAR 2021-2022 l Second SEMESTER

ANSWER THE FOLLOWING

1. Does the accounting system of a partnership differ from that of a sole

proprietorship.
Explain.
 Yes it’s different because PARTNERSHIP is When you and someone else start doing
business with the intent of making a profit, you have a partnership, sometimes
referred to as a general partnership. The partnership might begin with signing an
agreement to work together, or you could have an informal relationship based on a
conversation and a handshake. Your partner could be an individual or a business, and
you can have an unlimited number of partners. As with sole proprietorships, you do
not file anything with the state to form a partnership. The benefit of a partnership
over a sole proprietorship is that you'll share the responsibilities, resources, and
losses. On the other hand, you also split your profits, and you might face
disagreements over how to run the business. One way to mitigate conflict is to create
a partnership agreement.
And then on the another hand the SOLE PROPRIETORSHIP also known as a sole
trader ship, individual entrepreneurship or proprietorship, is a type of enterprise
owned and run by one person and in which there is no legal distinction between the
owner and the business entity. When you form a sole proprietorship, although you
are the only owner, you do not have to work alone. You can hire employees,
freelancers, and consultants to help run your business. However, you are the one
responsible for making the decisions for the business and all of the profits and losses
will go to you.

2. How should the partnership profits and losses be distributed to the partners?
 In partnership all partners share equally in the right, and responsibility, to manage and
control the business. The partnership agreement may centralize some management
decisions in a smaller group of partners, but all partners continue to share ultimate
responsibility for these decisions. By statute, unless a partnership agreement provides
otherwise, certain management decisions require unanimous consent of the partners.
Other decisions may be made by consent of a majority of the partners. The right to
share equally in decisions can make the decision-making process. But according to
stipulation in the partnership agreement If there is no stipulation, capital contribution
share of an industrial partner if there is no agreement is that which is just and
equitable. And according to the profit sharing stipulation an industrial partner is
exempted from losses.
3. To avoid future and disagreements in a partnership as to the distribution of
profits and losses regarding time devoted by each partner, its responsibilities and
capital contribution, how should these be addressed?
 To avoid disagreement in partnership as to the profit and losses find a partner that can
take responsibilities onto your company, don’t begin work without a signed operating
agreement and eliminate the win-lose mentality, address worst case scenarios.

4. Walter and Zamora entered into a partnership agreement but the agreement
failed to provide how profits and losses are to be divided, how will the partners
share in the profits and losses?

 If there is no written or oral agreement among the partners the law prescribe that
partners should share profits and losses equally.

5. Davis and Marilou have capital investments of P200,000 and P400,000

respectively. During the year the partnership earned P270,000 in profits but no
provision is found in the partnership agreement how to divide the profits and
losses. How should the net income of P270,000 be divided?

ANSWER:

David share P270,000/2= P135,000

Marilou share P270,000/2 = P135,000

It is divided equally or in 2 because there is no provision found in the partnership

agreement on how to divide the profits and losses.

6. How would you allocate the profits to Davis and Marilou in a general journal
form?

ANSWER:

Income summary 270,000

David 90,000
Marilou 180,000
270,000
Computation:
David: 270,000 x 200,000/600,000 = 90,000
Marilou: 270,000 x 400,000/600,000 = 180,000
270,000
7. If Davis and Marilou are receiving salary allowances of P100,000 each annually,
will each of them have the same total amount of profit allocated as determined in
No. 5.

ANSWER:

Davis Marilou Total

Salary allowance 100,000 100,000 200,000

Balance to be divided equally
C270,000 – 200,000 = 70,000
Davis: 70,000 x 50% 35,000
Marilou: 70,000 x 50% 35,000 70,000
Share of partners in profit 135,000 135,000 270,000
Yes, each of them have the same total amount of profit annually.

8. Do partner withdrawals of cash for personal use affect the sharing in profits and
losses based on ending capital?
 No because each partner has a separate capital account for investments and his/her
share of net income or loss, and a separate withdrawal account. A withdrawal
account is used to track the amount taken from the business for personal use.

9. Are partner’s salaries and interest on capital treated as business expenses? Why?
How can it be treated as an expense?
 Yes Salaries and interest paid to partners are considered expenses of the partnership
and therefore deducted prior to income distribution. Because these transactions
affect their capital accounts and the net income of the partnership.

10 Are the financial statements of a partnership similar to those of a single

proprietorship?
 The financial statements of a partnership business are similar to those of a
proprietorship. The income statement, statement of changes in partners’ equity and
the balance sheet follow.