How Is the Allocation of Partnership Profits Affected by Drawings

question 14

Multiple Choice

How is the allocation of partnership profits affected by drawings?

• A) Drawings must be added back to profits before they are allocated.
• B) Drawings must be deducted from profits before they are allocated.
• C) Drawings only affect profit allocation if the partnership agreement provides for interest on drawings.
• D) Drawings must be deducted from salaries due to the partners.

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Definitions:

Dividend Payment

A distribution of a portion of a company's earnings decided by the board of directors to its shareholders.

Share Ownership

The holding of stock in a company by individuals or entities, representing a claim on part of the corporation's assets and earnings.