Luke and Aldith Are Thinking About Setting Up a Partnership

question 64

Essay

Luke and Aldith are thinking about setting up a partnership to carry on a consulting business,but want to spend as little as possible.They have agreed that they will share profits and losses equally.Do they need a partnership agreement?

---

Definitions:

Purchase Discounts

Reductions in the purchase price of goods, services, or assets, usually offered as an incentive for prompt payment.

Sales Returns and Allowances

A reduction in sales revenue due to returned goods or allowances made for damaged or unsatisfactory products.

Freight-In

Costs associated with transporting raw materials or goods into a company from suppliers, considered part of the cost of purchasing inventory.

Net Purchases

The total cost of purchases made by a company after deducting any returns, allowances, and discounts.