Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 22 - No. 19)
What is the primary difference in the treatment of salaries paid to partners versus salaries paid to employees?
Partner salaries are not deductible as expenses for tax purposes, unlike employee salaries.
Partner salaries are included in the appropriation account, while employee salaries are in the income statement.
Employee salaries are treated as a distribution of profit, partner salaries are an expense.
Partner salaries are not subject to payroll taxes, employee salaries are.
Explanation
Partner salaries are usually treated as an expense on the income statement, before profit is distributed.
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