Accounting for Partnership: Profit or Loss Allocation
Like any
other business, a partnership conducts their operations to generate profit and
to allocate them at the end of the fiscal year. It is common and practical to
all partnership to have a profit or loss agreement. This agreement can be simple
or complex but should be equitable for the partners.
In the absence
of agreement, the share of each partners in profit or loss shall be in
proportion to their capital contribution.