Chen, Devi and Farah are partners sharing profits and losses equally. Chen is entitled to a partnership salary of $18,000 per year. The partnership made a net loss of $9,000 for the year ended 30 June 2024. How should this loss be appropriated?

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Question

Chen, Devi and Farah are partners sharing profits and losses equally. Chen is entitled to a partnership salary of $18,000 per year. The partnership made a net loss of $9,000 for the year ended 30 June 2024. How should this loss be appropriated?

Accepted Answer

Chen receives $18,000 salary; each partner is then debited with $9,000 — Award 1 mark for understanding that appropriations (including salaries) are made before sharing residual profit or loss. Net loss $9,000 + salary $18,000 = $27,000 to be shared. Each partner's share = $27,000 ÷ 3 = $9,000 debit. A is incorrect — ignores the salary appropriation. C is incorrect — appropriations are still made regardless of profit or loss. D is incorrect — the salary creates an additional amount to be shared, not a separate treatment.

Answer

Chen receives $18,000 salary; the remaining loss is shared equally

Answer

Each partner is debited with $3,000 in the appropriation account

Answer

No appropriations are made as the partnership made a loss

Answer

Chen receives $18,000 salary; each partner is then debited with $9,000

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