Partnership Operations – Compensation for services rendered.

Profit or Loss, this must be provided.

Q1: How do partners divide profits and losses?
 In accordance with their Case 1: With remaining profit – different P/L
partnership agreement ratio
1. Deduct salaries from profit
Art. 1797 Philippine Civil Code adds 2. Allocate the remainder based on P
 If only profits are agreed upon, ratio
same proportion for losses is used
 If no stipulation, according to Case 2: No remaining profit – different P/L
contribution. 1. Deduct salaries from Profit
 Industrial partner – not liable for 2. Allocate the remainder based on L
losses and receive a share that is ratio
just and equitable.
 If industry + capital, will also receive Case 3: No P/L ratio

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share in profits in proportion to 1. Deduct salaries from profit

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capital 2. Allocate remainder based on

co
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 Losses and profits cannot be left to respective contributions
one of the partners (Art. 1798)

o.
 Stipulation excluding one or more *If recognized as expense, otherwise stated, must be
rs e
partners from any share in P/L = added back to the given amount of profit before
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void computing for anything else.

Bonus
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Contribution - Only provided when business

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Industrial partner – Services operations resulted profit.

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Capitalist partner – Cash/non-cash asset

Industrial-capitalist – both Case 1: With Profit
1. Identify if bonus is derived from
Q2: Besides P/L sharing, what else do partners
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profit before or after any

stipulate? deductions such as salaries,
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a. Salaries interest, tax and also the bonus

b. Bonuses itself.
c. Interest on Capital Contributions 2. Compute for Bonus (there are
is

formulas)*
Provided first and then excess (deficit)
Th

3. Deduct all deductions from profit (S,

from P/L are shared based on P/L ratio
B, I)
Q3: What if there is already loss before 4. Allocate remainder based on
stipulation or contribution (if no
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deducting S, B, I?
 Salaries - compensated stipulation)
*understand, don’t memorize
 No bonus
 Interest – incur from partners
Case 2: With Loss
-No bonus
Salaries*

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 Bonuses can be also computed based on a
stipulated limit
Example: 10% bonus = Profit ≤ 100,000
20% bonus = Profit ≥ 100,000

And, be stipulated to have choices i.e. choosing

to receive a certain amount of salary + bonus or
a salary that is offered higher than the salary to
be given if there is a bonus.
Example: Choosing between 10% Bonus after
deduction + 5,000 salary and 8,000 salary.

In this case, bonus must be computed to know

which is advantageous.

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Interest

er as
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Interest on Capital
Q4: How to get the weighted average capital

o.
 rs e
Balances x months outstanding
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12
 Total the results
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Q5: What if the amount of Profit is the one

aC s

being asked?
vi y re

 This results to reconstruction of

information
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Q6: How to reconstruct information effectively?

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1. Prepare a pro-forma allocation table

2. Squeeze for identifiable amounts
based on the given
3. Squeeze for the total remaining
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profit for allocation

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4. Allocate remaining profit

5. Adjust
sh

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