Distribution of Profit and Loss Q&A

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on March 25, 2022

1. What is a partnership?

2. Name four of the essential elements of a partnership.

3. Name four advantages of partnerships.

4. How many types of partners are there in a partnership business?

5. Define the following:
1. Active partner
2. Sleeping partner
3. Nominal partner

6. What is a partnership deed/agreement?

7. Describe the methods used to maintain the capital account in a partnership business.

8. What is the capital ratio?

9. What is goodwill?

Frequently Asked Questions

Is Profit Distribution an expense?

Although distributions are listed on the balance sheet, they do not affect income statement. They should not be counted as expenses because they do not affect business profitability.

What is Partnership?

If there is no written or oral agreement among the partners, profits and losses should be shared equally.

What is Partnership?

What is Partnership?

Can a partner take a salary?

A partner in an LLC is not considered an employee and can’t receive a salary.

What is meant by distribution of profit?

The distribution of profits is an arrangement that states how profits are to be divided amongst partners, members, and employees of a company in accordance with an agreement.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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