Partnership accounts
Partners share profits and losses according to their agreed profit-sharing ratio, usually set out in a partnership deed. Each partner typically has a capital account (their fixed long-term investment) and a current account (tracking their share of profits, drawings, and interest).
Example 1: Two partners, A and B, agree to share profits in a 3:2 ratio. If the partnership's profit for the year is ₦100,000, find each partner's share.
Total ratio parts = 3 + 2 = 5. A's share = . B's share = .
Company accounts
A limited liability company raises capital by issuing shares to shareholders, who become part-owners. The total amount raised this way is the company's share capital. After covering expenses and tax, remaining profit can be distributed to shareholders as dividends (usually per share held), or retained within the business for reinvestment (retained earnings).
Example 2: A company declares a dividend of ₦2 per share. A shareholder owns 5,000 shares. Find the total dividend they receive.
Total dividend = naira.