A method of dividing net income or loss between the partners is known as a(n):
A) salary allowance.
B) interest allowance.
C) payroll allowance.
D) Both A and B are correct.

Question

Quizplus · Accepted Answer

Salary allowance and interest allowance are both methods of dividing net income or loss between partners in a partnership. Salary allowance refers to a predetermined amount allocated to partners for their services to the partnership, while interest allowance is a predetermined rate of interest paid on the partners' capital contributions. Both are used to distribute profits before the remaining amounts are divided according to the partnership agreement.

A Method of Dividing Net Income or Loss Between the Partners