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Albert and David are in partnership, sharing profits and losses in the ratio 3:2. Under the terms of the partnership agreement, David is entitled to a salary of $8,000. The partnership statement of profit or loss for the year to 30 November 20X4 reported a profit of $16,000.
What is David’s share of the profit?
So, salaries are awarded first. That’s the case even if there isn’t enough profit, in which case the resultant deficit would be split in the PSR.
Here, that isn’t a problem. David is awarded 8000, leaving 16 – 8 ie 8000 profits to be split in the 3:2 ratio. David gets 2/5 x 8000 = 3200. In total he gets 8000 (sal) + 3200 = 11200.
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