1. Partnership Accounting
Recording initial investments
And
Division of income
As well as
Statement of Partnership Equity

2. Initial Investment of Partners
If partners initially invest cash, the journal entry is:
If partners initially invest cash, non-cash assets and liabilities, the journal entry is:

3. Once the Partnership operations begin, partners must now divide income or loss.
No salaries on Income Statement for partners. Partners are owners not employees
Can receive a “salary allowance” as part of their capital account
No partner interest expense on Income Statement for partners.
Can receive an “interest allowance” as part of their capital account
Four methods to divide income or (loss):
In the absence of an agreement, the law requires each partner receive an equal share
Stated ratio basis outlined in partnership agreement
Ratio of capital balances; though capital balances change, the partners will have to recalculate the ratios as they change
After consideration of the salary and interest allowances, partners can share the remainder according to the partnership agreement – either equally or on another basis

4. Stated Ratio Method of Dividing Inc(Loss)
Ratio can be stated as:
One third and two thirds or one eighth, two eights, five eights
5:4:3 which translates to a total of 12 (5 plus 4 plus 3) and the partners respectively receive 5/12ths, 4/12ths, or 3/12ths.
If income is $60,00
And they share one third and two thirds, the journal entry is:
And they share by 12ths, the journal entry is:

5. Capital Balances Method of Dividing Inc(Loss)
If beginning capital balances are Zayn $30,000 and Perez $10,000, you would add the capital balances together and take each partner’s portion of the total. Which would be 30,000/40,000 for Zahn and 10,000/40,000 for Perez or simply 3/4ths and 1/4th
If net income is $60,000, the journal entry is

6. Allocation w Salary, Interest and Partnership Agreement-Basis for Remainder
Salary allowance to Zayn $36,000 and to Perez $24,000
Interest allowance of 10% to each based on beginning capital balances
Remainder to be shared equally (but could be based upon any of the previously stated methods to divide income)
Net Income is $70,000

7. Capital Balance after Income Distributions and any Withdrawals
In addition to the prior example, Zayn withdrew $20,000 and Perez withdrew $12,000
If they share based on capital balances, the respective ratios would now be 52/78 for Zayn and 26/78 for Perez