Asked by Corinna Vogel on May 05, 2024
Verified
An interest allowance in sharing partnership net income (or net loss) is related to the amount of partners' invested capital during the period.
Interest Allowance
An amount allowed for interest, which can refer to the interest expense permitted on debt or the interest credited to an account; specifics can vary based on context.
Invested Capital
The total amount of money that shareholders and debt holders have invested in a company.
- Comprehend the principles of profit and loss sharing among partners, including how income ratios, salary allowances, and interest on capital work within partnerships.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
True
Explanation :
An interest allowance is based on the partners' capital balances and represents the return on their investment in the partnership. Therefore, it is directly related to the amount of partners' invested capital during the period.
Learning Objectives
- Comprehend the principles of profit and loss sharing among partners, including how income ratios, salary allowances, and interest on capital work within partnerships.