If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio.

Net Income

The profit remaining after all costs, expenses, and taxes have been subtracted from total revenue.

Allowances

Funds set aside or discounts offered to account for various factors such as potential returns, defective goods, or customer satisfaction initiatives.

Income-Sharing Ratio

An agreed upon proportion used to distribute profits or losses among partners in a partnership.