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ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships

Oskar and Pia form a partnership. Their written agreement states that Oskar receives 70% of profits and Pia 30%. In the first year the firm makes a loss of 50,000 and the agreement says nothing about losses. How are the losses shared?

Losses are shared 70% to Oskar and 30% to Pia. Where an agreement sets a profit-sharing ratio and says nothing about losses, losses follow the same ratio, giving Oskar 35,000 and Pia 15,000.

  1. AEqually, 25,000 each
  2. B70% to Oskar and 30% to Pia, as losses follow the profit-sharing ratioCorrect
  3. CEntirely by Oskar, as the senior partner
  4. DEntirely by Pia, as the junior partner

Explanation

Where the agreement fixes a profit-sharing ratio but is silent on losses, losses are shared in the same ratio as profits. Oskar bears 35,000 and Pia 15,000. The equal sharing rule applies only if there is no agreement on profits either.

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