Accounting – 5.2 Partnerships | e-Consult
5.2 Partnerships (1 questions)
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Here are four clauses that Sarah and John should include in their partnership agreement, addressing financial contributions and profit distribution, presented in a table:
| Clause | Description |
| Initial Capital Contribution | Specifies the amount of money each partner will contribute to start the business. For example, Sarah contributes £5,000 and John contributes £3,000. |
| Profit Sharing Ratio | Defines the percentage of profits each partner receives. For instance, Sarah receives 60% and John receives 40%. |
| Additional Capital Contributions | Outlines the process for requesting and agreeing upon further capital contributions from either partner if the business requires it. It should specify how these contributions will be funded. |
| Loss Allocation | Specifies how losses will be allocated between the partners, typically mirroring the profit sharing ratio. This ensures fairness during difficult financial periods. |