How to Determine the Net Profit of a Partnership
The net profit that a partnership makes in a year is the difference between its revenue and expenses. The partners must each declare a share of this figure on their individual tax returns because the partnership itself does not owe federal taxes. The net profit also helps the partners more broadly judge the partnership's performance. The figure is used to determine the partners' return on investment by comparing the partnership's net profit to the value of its assets.
Compile your revenues for the year. For example, suppose that you make revenues of $50,000.
Compile your operating costs and expenses, which include material costs, administrative expenses and miscellaneous costs such as impairment. For example, suppose that you have operating costs and expenses of $30,000.
Subtract your operating costs from your revenues to calculate your operating income. With this example, subtract $30,000 from $50,000 to get $20,000.
Add to your operating income any other income, including income from discontinued operations. For example, if this comes to an additional $3,000, add $3,000 to $20,000 to get $23,000.
Subtract from this figure any non-operating expenses, such as interest payments. For example, if this comes to an additional $2,000, subtract $2,000 from $23,000 to get $21,000. This is your partnership's net profit.