If the partnership agreement specifies salaries to partners interest on partners' capital and the remainder on a fixed ratio and partnership net income is not sufficient to cover both salaries and interest

Question

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If the partnership agreement specifies salaries to partners interest on partners' capital and the remainder on a fixed ratio and partnership net income is not sufficient to cover both salaries and interest, both salaries and interest are allocated to the partners. This is because the partnership agreement specifies these amounts as fixed payments to the partners, which must be paid regardless of whether the partnership earns a profit or not. The remaining net income, if any, is then allocated according to the fixed ratio specified in the partnership agreement.

If the Partnership Agreement Specifies Salaries to Partners Interest on Partners