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Hi Sir,
I would like to ask this question,
If the annual salaries of partners are 12,000 and 13,000.
The year ending is 5 April.
On 6 May, Megan is admitted as partner on terms that she received a salary of 15,000 and the salary of existing partners increased to 15,000 a year each.The gap between 5/4 to 6/5 , 1 month, does the salary follow the new salary 15,000 x 1/12 or old 12,000 x 1/12 ?
1/12 *12,000 +11/12*15,000
1/12*13,000+11/12*15,000
Megan
11/12*15,000.she wasn’t there for the first month .Her share of profits will be calculated on the ratio terms agreed on when she joined the partnership on 6 May.The original two partners will get first month profits based on original ratio agreements(1/12 of the total profits).So to my understanding we deduct salaries first before we apportion the profits .Therefore for the original two partners one month salary (1/12*12000 and 1/12*13000) will be deducted from one month profits(April to May ).This was the original terms have been dealt with completely .All we have to do now is to move into the period of the year when they received the new partner Megan .So 11 months of the annual salary multiplied by 3 will be deducted from the total profits before apportionment based on agreed ratios.
So the 1month before salary increased will be based on the old salary 12000 and 13000. I got it. Thank you very much for the clear explanation.
Absolutely the first month salary for original partners is calculated based on 12, 000 and 13, 000. The are annual salaries which were effective for one month before terms changed. The remaining 11 months are based on the increased annual salary of 15, 000.
Thank you tinaboy for providing a correctly computed answer for csacct1 (remember the salaries are a part of the profit apportionment but are indeed applied first before then splitting the remaining profit in the PSR) but it would be best in this ask the tutor forum to leave answering the questions to the tutor so as to avoid any misunderstanding – many thanks.
I do apologise. My first time using OT therefore thought it as an open discussion forum where we discuss things and the tutor correct us. Thanks for letting me know
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