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Chapter 8
PARTNERSHIPS
1.
Introduction
A partnership is a single trading entity, but
for taxation purposes each individual partner is
e
ff
ectively treated as trading in his own right
and is assessed on his or her share of the adjusted
trading profit of the partnership. It is essential to understand therefore that it is not the partnership
itself that is assessed upon its adjusted trading profit, but it is each individual partner who will be
assessed on his or her share of that adjusted trading profit.
2.
Trading income
(a)
The partnership’s tax adjusted profits or loss for an accounting period (after capital allowances
for the partnership) is computed in the same way as for a sole trader.
(b)
Partners’ salaries and interest on capital debited on the statement of profit or loss are not
deductible as expenses as these are simply an allocation of trading profit by the owners of the
business. These must be added back in the adjusted profits computation.
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