The Objective of Allocating Profits and Losses Is to Reward

question 34

Multiple Choice

The objective of allocating profits and losses is to reward each partner fairly for the resources and services contributed to the partnership. Which of the following factors would not be directly relevant in negotiating a profit and loss sharing agreement for a partnership?

• A) The risks assumed by each partner.
• B) The size of each partner's non-partnership assets.
• C) Work done by each partner in the partnership.
• D) Capital contributed by each partner to the partnership.

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Definitions:

Planning Budget

A budget created for a specific level of activity, usually projected at the beginning of a planning period as a guide for income, spending, and capital investment decisions.

Personnel Expenses

Costs incurred by a business related to employing staff, including wages, benefits, training, and other related expenses.

Client-Visits

The number of times clients or customers visit a business or service provider within a given time period.

Planning Budget

A budget prepared for a specific level of activity; it may be adjusted as activity levels change.