Income Ratio
Accounting glossary · Understand, connect, apply
A partnership income ratio is the agreed basis for allocating profit or loss among partners, which may differ from their capital contribution proportions.
Example
Partners agree to share residual income 60:40. A $5,000 residual profit is allocated $3,000 and $2,000.
Remember the difference
Salary or interest allowances in an allocation agreement are not necessarily employee payroll expenses. Apply the agreed sequence before dividing the remainder.
Updated 3 November 2026. Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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