Final Answer:
The formula used to distribute profits typically involves several components like interest on capital balances, interest on notes receivable, and a distribution based on agreed ratios after all allocations.
thus correct option is b. Salary allowances granted to the managing partners
Step-by-step explanation:
The formula used to distribute profits typically involves several components like interest on capital balances, interest on notes receivable, and a distribution based on agreed ratios after all allocations. However, salary allowances for managing partners aren't usually part of the profit distribution formula.
When distributing profits among partners, interest on average capital balances and notes receivable from partners are considered as they pertain to financial arrangements between partners. The agreed ratio after all allocations ensures equitable profit sharing based on the agreed terms. However, salaries for managing partners are usually treated as operational expenses and are paid before profits are calculated for distribution.
While managing partners may receive compensation, it's generally separate from the profit distribution process. Their salaries are determined based on their roles, responsibilities, and contributions to the firm's management rather than being directly tied to the profits earned by the partnership. Therefore, in the context of profit distribution formulas, salary allowances for managing partners are not typically included as a component.
thus correct option is b. Salary allowances granted to the managing partners