Week 5 - Owners Equity

Question 1

What are the different types of owners equity that exist

Answer 1

sole traders, partnerships, limited liability

Question 2

what is the drawings account for in a sole trader business

Answer 2

account from which owner takes his salary, copmmisions, fees and any other income

Question 3

How is net income divided among partners

Answer 3

proportionally to the capital contributed

Question 4

what do partners receive

Answer 4

a stated salary, or stated % on capital contributed or combo of both

a stated share of resudual profit after salaries (profit sharing ratio)

Question 5

What are the steps for allocating profit to partners

Answer 5

allocate salaries
allocate any % on capital
allocate remaining profit in the profit sharing ratio given (remaining profit = profit for period - salary - capital interest)

Question 6

how to find closing capital in partnetship

Answer 6

openign capital minus profit share minus drawings (all done individually for each partner and then add to find total)

Question 7

how to calculate what profit remains to be split in the ratio

Answer 7

profit for period minus salaries and minus interest paid on opening capital