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Question:
Using the library or the internet, research examples of different methods that partnerships can use to allocate net income to the partners, and research the topics of partnership dissolution or partnership liquidation
When you''ve completed your research, provide at least one example of how income may be allocated among partners. Next, include the journal entries you believe would be needed to allocate the partnership income to each partner''s capital account.
Finally, summarize what you have found regarding how to account for the dissolution or liquidation of a partnership.
Be sure to provide the references to your sources at the bottom of your post and minimize the use of direct quotes from your sources (no more than 20% of your post should contain direct quotes, although ideally, you should paraphrase what you have found using your own words).
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Partnership is kind of structure for single business under which association of two or more people is done for conducting business so as to earn profit out of the business. In United States partnership structure is governed by the Revised Uniform Partnership Act, 1997 drafted by National Conference of Commissioners on Uniform State Laws. Partners are referred as co-owners of the business and every individual have their rights to take decision separately. Partners act as both principal and agents of the partnership firm.
Allocation of Income:
There are mostly three types of partnership structure which are as shown below:
Firstly, General Partnership firms under which profits or losses are allocated either equally among the partners or as per defined agreements. Where there is no defined agreement then section 18(a) of Uniform Partnership Act, 1997 applies which is a default rules under which profit or losses are shared equally i.e. as per capita and not as per the capital balance or contribution of the partners.
Secondly, Limited Partnership firms which also referred as limited liability partnership, under this type of partnership generally profit are allocated on the basis of capital contribution of the partner and not equally shared. Structure of the limited liability partnership is complex than general which provide the benefit of limited liability clause for the partners of the partnership business due to which liability of each partner is fixed up to the contribution brought by them in to the business.