Question

In the computation of a partner's Loss Absorption Power (LAP), the individual partner's capital balance and profit-and-loss percentage are used in which of the following ways?

1) Denominator Numerator
2) Numerator Not used
3) Numerator Denominator
4) Not used Denominator

Answer 1

In the computation of a partner's Loss Absorption Power (LAP), the individual partner's capital balance is used in the denominator, and the profit-and-loss percentage is used in the numerator.

In the computation of a partner's Loss Absorption Power (LAP), the individual partner's capital balance and profit-and-loss percentage are used in the denominator and numerator, respectively.