Answer: The purpose of defining a salary allowance
for each partner in a partnership agreement is to compensate the partners
for work performed within a partnership in relation to the portion of profits
(losses). When profits are distributed to each partner's capital
account at the end of the accounting period, a salary allowance is one
way to achieve equity among the partners. However, this does not
mean that each partner must withdraw his/her salary allowance each year.
If a partner does not withdraw his/her salary allowance from the partnership
in a given year (or if he/she withdraws more than their salary allowance)
the remainder stays in their capital accounts and increases (decreases)
the claim they have on the assets of the partnership.