ACCT 5 Rev

By chengsteven1909 | Updated: May 6, 2020, 12:51 p.m.

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Based on Capital
 Ratio
Allowing Salaries,
 Interest, Bonus 
Original/Initial investment 
Beginning capital balance 
Ending capital balance 
Average capital - 
most equitable method 
considered as part of the distribution of net income 
Real Life
situation
FOOD
INDUSTRY
HI! I AM JEN
HI! I AM LILY
HI! I AM BENNY
Benny, Lily, Kelly and Jen are partners of a Fast Food Restaurant 
HI! I AM KELLY
CAPITAL 
ACCOUNT
Kelly is an industrial partner. Benny and Jen invest their cash to the partnership. While Lily invests supplies. These account is credited as CAPITAL ACCOUNT
DRAWING
ACCOUNT
Because Lily lives far away from the Fast Food Restaurant so Lily borrows some cash from the partnership to buy a car for her convenience to go to work. This is recorded as a drawing account.
After the partnership 
has been already for a 4 months, Lily is lacking out of cash. So she want to borrow cash from other partners
Benny and Jen are the LOAN FROM PARTNER
Lily is the LOAN TO PARTNER
Lily borrows cash from the other partner so she is the LOAN TO PARTNER. Benny and Jen are the ones who borrowed cash to Lily so they are LOAN FROM PARTNERS.
After a year the partnership is gonna dividing the Profit and Loss from the Fast Food Restaurant.
Since Kelly who work as a chef in the partnership, she is dividing the profit or loss by her SERVICE RENDERED
Benny, Lily, and Jen are dividing the profit and loss by CAPITAL INVESTMENT. Since they invest their assets to the partnership
Jen is also a manager in the Fast Food Restaurant. Aside from capital investment, Jen also has the bonus from dividing the profit or loss which is based on net income 
Entrepreneurial ability or managerial skills
In Dividing the Net 
Income, they use Arbitrary Ratio and they allowing salaries, interest, bonus to be considered as part of the distribution of net income
 Dividing Net Income
Kelly has 10% of Net Income and salaries
Lily has 20% 
of Net Icome
Benny has 
30% of Net 
Income
Jen has 40% of Net Income and bonus

ACCT 5 Rev

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