The partnership agreement outlines five critical element that partners must agree upon before the partnership begins: (1) decision-making, (2) capital contribution, (3) salaries/distributions, (4) death/disability, and (5) dissolution. Deciding how important decisions are ma...
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...g goodwill based on each partner’s profit/loss ratios. However, the capital balance belonging to the withdrawing partner is adjusted to the amount withdrawn. The partnership equity section is broken down by the number of partners in the partnership. On the Balance Sheet, each partner’s equity will be listed into two categories: (1) Capital Account and (2) Current Account. The Capital Account represents the investments put into the business by a partner and the Current Account includes the profits and losses allocated to each partner based on the predetermined ratios. However, any partner withdrawals need to be deducted from the Current Account before final figures are computed. The ending Capital Account from the Statement of Partner’s Capital is added to the Current Account to calculate the overall balance in Owner’s Equity (Merritt 2016) (Rogers 2016) (Rojas 2016).
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