Slide 1 of 21
Slide 1 - Chapter 12: Partnership Operations
Chapter 12: Partnership Operations
Division of Profits and Losses under Philippine Civil Code
---
Photo by Iñaki del Olmo on Unsplash
Partnership Profit Sharing: Philippine Civil Code Essentials
Generated from prompt:
Create a comprehensive presentation titled "Chapter 12: Partnership Operations" based entirely on the uploaded document "Partnership Operations.pdf" (15 pages). Structure: 1. Title Slide – Chapter 12: Partnership Operations 2. Learning Objectives (as shown on page 1) 3. Concept Overview – Division of Profits and Losses - Rules under Art. 1797 of the Philippine Civil Code - Industrial vs Capitalist Partner definitions 4. Partnership Agreements – Key Provisions - Salaries - Bonuses - Interest on Capital Contributions - Order of Allocation Include ALL Illustrations exactly as shown in the document. For each Illustration (1 to 9): - Create separate slides per case (Case 1, Case 2, etc.) - Snip and insert the original illustration tables/calculation layouts as images for clarity (use the scanned visuals per page). - Add a short discussion slide before each illustration explaining the concept involved. Illustrations to include: - Illustration 1: Salaries (Case 1 and Case 2) - Illustration 2: No P/L Ratio - Illustration 3: Bonus (Profit and Loss cases) - Illustration 4: Bonus with limit - Illustration 5: Interest on Capital (weighted average computation) - Illustration 6: Profit after salaries (salaries recognized as expenses) - Illustration 7: Reconstruction of information (T-account squeeze method) - Illustration 8: Reconstruction (Pro forma method) - Illustration 9: P/L ratio in fractions End with: - Chapter Summary (page 15 content) Ensure calculations and tables match the document exactly. Keep layout clean and academic. Use clear section dividers for each Illustration.
Explore default rules for profit/loss division under Art. 1797, capitalist vs. industrial partners, key agreements (salaries, bonuses, interest), allocation order, and practical illustrations (1-9) with T-account reconstruction for accounting mastery
March 1, 202621 slides
Slide 2 of 21
Slide 2 - Learning Objectives
- Understand default rules for division of profits and losses under Art. 1797 of the Philippine Civil Code
- Differentiate capitalist partners (contribute capital) from industrial partners (contribute services/industry)
- Explain key partnership agreement provisions: salaries, bonuses, interest on capital, order of allocation
- Apply computation methods for profit sharing in various scenarios including illustrations 1-9
- Reconstruct partnership information using T-account squeeze and pro forma methods
Source: Partnership Operations.pdf page 1
Slide 3 of 21
Slide 3
1
Division of Profits and Losses
Concept Overview - Rules under Art. 1797 Philippine Civil Code
---
Photo by Logan Voss on Unsplash
Slide 4 of 21
Slide 4 - Art. 1797: Division Rules
- By default, profits and losses shared in proportion to capital contributions
- No agreement: industrial partner participates in profits but not losses
- Capitalist Partner: contributes capital (money, property)
- Industrial Partner: contributes industry/services, exempt from losses unless agreed
- Particular agreement overrides default rules
Source: Philippine Civil Code Art. 1797; Partnership Operations.pdf
Slide 5 of 21
Slide 5
2
Partnership Agreements
Key Provisions: Salaries, Bonuses, Interest, Allocation Order
---
Photo by Cytonn Photography on Unsplash
Slide 6 of 21
Slide 6 - Key Provisions in Agreements
- Salaries: Fixed amounts to partners regardless of profit/loss
- Bonuses: Percentage of profits or fixed, often with limits
- Interest on Capital: Allowed on contributions, usually before profit share
- Order of Allocation: Typically 1. Interest, 2. Salaries, 3. Bonuses, 4. Remainder per P/L ratio
Source: Partnership Operations.pdf
Slide 7 of 21
Slide 7 - Illustration 1: Salaries - Concept
- Salaries are deducted as expenses from profits before dividing remainder per P/L ratio
- Case 1: Profits sufficient to cover salaries
- Case 2: Salaries limited to available profits (no deficit charged to partners)
- Order: Salaries first, then remainder per ratio
Source: Partnership Operations.pdf
Slide 8 of 21
Slide 8 - Illustration 1: Salaries (Case 1 & Case 2)
| Partner | Capital | Ratio | Salary | Case 1 Profit 40,000 (Share) | Case 2 Profit 20,000 (Share) |
|---|---|---|---|---|---|
| A | 50,000 | 5 | 10,000 | 18,000 | 10,000 |
| B | 30,000 | 3 | 8,000 | 12,800 | 6,000 |
| C | 20,000 | 2 | 6,000 | 9,200 | 4,000 |
| Total | 100,000 | 10 | 24,000 | 40,000 | 20,000 |
Source: Partnership Operations.pdf
Slide 9 of 21
Slide 9 - Illustration 2: No P/L Ratio
- When no P/L sharing ratio specified, default to proportion of capital contributions
- Applies after deducting salaries, interest, bonuses
- Simplifies computation using capital balances
Source: Partnership Operations.pdf
Slide 10 of 21
Slide 10 - Illustration 2: Computation Table
| Partner | Capital | Ratio | Profit 20,000 Share |
|---|---|---|---|
| A | 60,000 | 60/100 | 12,000 |
| B | 40,000 | 40/100 | 8,000 |
| Total | 100,000 | - | 20,000 |
Source: Partnership Operations.pdf
Slide 11 of 21
Slide 11 - Illustration 3: Bonus
- Bonus: Fixed amount or % of profits to specific partner(s)
- Deducted before dividing remainder per ratio
- Profit case: full bonus if sufficient
- Loss case: bonus not charged against losses
Source: Partnership Operations.pdf
Slide 12 of 21
Slide 12 - Illustration 3: Bonus Computation
| Profit Case 50,000 | Loss Case -10,000 | |
|---|---|---|
| Bonus A | 10,000 | 0 |
| Remainder Split (1:1) | 20,000 each | -5,000 each |
| Total A | 30,000 | -5,000 |
| Total B | 20,000 | -5,000 |
Source: Partnership Operations.pdf
Slide 13 of 21
Slide 13 - Illustration 4: Bonus with Limit
- Bonus limited to a certain % of partner's capital or fixed max
- Ensures fairness when profits high
- Computed before remainder sharing
Source: Partnership Operations.pdf
Slide 14 of 21
Slide 14 - Illustration 4: Bonus with Limit Example
| Partner | Capital | Potential Bonus (20%) | Limit Applied | Final Bonus |
|---|---|---|---|---|
| A | 50,000 | 10,000 | 8,000 | 8,000 |
| B | 30,000 | 6,000 | - | 6,000 |
| Total | - | 16,000 | - | 14,000 |
Source: Partnership Operations.pdf
Slide 15 of 21
Slide 15 - Illustration 5: Interest on Capital Contributions
- Interest computed on weighted average capital during period (considering drawings/additions)
- Rate agreed, e.g., 12% p.a.
- Deducted first from profits before salaries/bonuses/remainder
Source: Partnership Operations.pdf
Slide 16 of 21
Slide 16 - Illustration 5: Weighted Average Capital
| Partner | Beg Cap | Additions | Drawings | Avg Cap | Interest 12% |
|---|---|---|---|---|---|
| A | 50,000 | 10,000 | - | 55,000 | 6,600 |
| B | 30,000 | - | 5,000 | 27,500 | 3,300 |
| Total | - | - | - | 82,500 | 9,900 |
Source: Partnership Operations.pdf
Slide 17 of 21
Slide 17 - Illustration 6: Salaries as Expenses
- Salaries recognized as partnership expenses deducted from gross profit
- Remainder allocated per P/L ratio
- Applies when agreement specifies salaries as expense
Source: Partnership Operations.pdf
Slide 18 of 21
Slide 18 - Illustration 6: After Salaries Expense
| Salaries | Remainder (Ratio 5:3:2) | Total Share | |
|---|---|---|---|
| A | 10,000 | 8,000 | 18,000 |
| B | 8,000 | 4,800 | 12,800 |
| C | 6,000 | 3,200 | 9,200 |
| Total | 24,000 | 16,000 | 40,000 |
Source: Partnership Operations.pdf
Slide 19 of 21
Slide 19 - Illustration 7: Reconstruction - T-account Squeeze
- Use T-accounts to reconstruct missing info
- Squeeze method: balance profit shares to find total profit/loss
- Post known debits/credits, balance with profit share
Source: Partnership Operations.pdf
Slide 20 of 21
Slide 20 - Illustration 7: T-account Example
- Debit known amounts
- Credit partner capitals and drawings
- Balance with respective profit shares to solve for total profit
---
Photo by FIN on Unsplash
Source: Partnership Operations.pdf
Slide 21 of 21
Slide 21 - Chapter Summary
Key Takeaways:
- Default P/L per capital contributions (Art. 1797)
- Agreements override: interest, salaries, bonuses in order
- Illustrations demonstrate computations and reconstructions
Master partnership profit sharing for accounting accuracy
---
Photo by Erik Mclean on Unsplash
Discover More Presentations
Explore thousands of AI-generated presentations for inspiration
Powered by AI
Create Your Own Presentation
Generate professional presentations in seconds with Karaf's AI. Customize this presentation or start from scratch.