Tx notes fa22 Final

3.
 
Allocation of the trading profit or trading loss 
(a)
The adjusted trading income or trading loss is divided between the partners according to their 
profit sharing arrangements in force during the accounting period.
(b)
Partners may firstly be entitled to salaries and interest on capital. The balance of any trading 
profit (or loss) will then be allocated in the profit sharing ratio (PSR).
4. A change in the profit sharing agreement 
If the profit sharing agreement is changed during a period of account, the profit must be time 
apportioned before allocation under the di
ff
erent agreements.
 
Example 1 
Doug and Rob are in partnership. The trading income for the year ended 30 September 2022 was 
£18,000
Up to 30 June 2023 profits were shared between Doug and Rob 3:2, after paying salaries of £3,000 
and £2,000 per annum.
From 1 July 2023 profits were shared 2:1 after paying salaries of £6,000 and £4,000 per annum.
Show the allocation of trading profits for the Accounting Period ended 30 September 2022.



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5. Partnership capital allowances 
(a)
Capital allowances are deducted as normal in calculating the tax adjusted trading profit.
(b)
If assets are used privately by the partners, then as for a sole trader only the business 
proportion is included in the capital allowances computation.
6. Commencement and cessation 
(a)
The rules for commencement and cessation when a partner joins the partnership or leaves the