The objective of allocating profits and losses is to reward each partner fairly for the resources and services contributed to the partnership. Which factors would not be directly relevant in negotiating a profit and loss sharing agreement for a partnership?
A) Work done by each partner in the partnership
B) The size of each partner's non-partnership assets
C) Capital contributed by each partner to the partnership
D) The risks assumed by each partner

Question

Quizplus · Accepted Answer

The size of each partner's non-partnership assets would not be directly relevant in negotiating a profit and loss sharing agreement for a partnership because it does not reflect the contributions or efforts of the partners within the partnership. The other factors listed (work done, capital contributed, risks assumed) are all directly relevant to negotiating a fair profit and loss sharing agreement.

The Objective of Allocating Profits and Losses Is to Reward