Scenario

Debra and Lori operate a nail salon business as partners who share profits and losses equally. The success of their business has exceeded their expectations, and the nail salon is operating at a profitable level.

The partners have quite different approaches to operating the business, however. Lori is anxious to maximize profits, so she schedules appointments from 8:00 AM to 6:00 PM daily. She even sacrifices some lunch hours to accommodate regular customers. Debra, by contrast, schedules her appointments from 9:00 AM to 5:00 PM and takes long lunch hours. Debra regularly makes significantly larger withdrawals of cash than Lori does. She tells Lori not to worry, however: I never make a withdrawal without letting you know, so it is properly recorded in my drawing account and charged against my capital at the end of the year. To date, Debras withdrawals are twice as much as Loris withdrawals.

Imagine that you are an accountant who has been hired by the nail salon owners to provide recommendations regarding their partnership, ethical considerations, and financial reporting.

Instructions

1. Explain 4 factors from the scenario that contribute to the dilemma.

The scenario includes information about the partners behavior, business communication style, and business operations that will change overall profit. Include all details needed to show both partners obligations to the partnership and the nature of the dilemma the partners face.

2. Outline 4 major components of partnership agreements.

3. Describe the advantages and disadvantages of two types of partnerships.

4. Identify 4 ethical concerns with Debras and Loris actions related to business communication.

5. Propose changes to the partnership agreement that address the differences in Debras and Loris work and withdrawal habits. Be sure to explain how these changes will address the differences.

6. Explain 4 effects on the partnerships financial statements that will result from the changes you proposed.

7. Use 3 or more quality sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within this assignment.