accting for partnerships

Question 1

partnerships are?

Answer 1

Partnership Act

The relationship that subsists between persons carrying on a business in common with a view to profit.

Question 2

Three Necessary Attributes of partnership?

Answer 2

1. Written or verbal agreement between two or more legally competent persons or entities to carry on a business
2. Operated with a view to earning a profit
3. Members must be co-owners of the business

Question 3

CHARACTERISTICS OF A PARTNERSHIP

mutual agency?

Answer 3

each partner acts as an agent i.e. has the authority to act on behalf of the partnership

Question 4

CHARACTERISTICS OF A PARTNERSHIP

unlimited liability

Answer 4

– each partner responsible for debts of business. NO limit and personal assets can be taken

Question 5

advantages of partnership?

Answer 5

Pooling of resources and multiple skills of individual partners
ease of formation
subject to little regulation
ease of decision making (no board of directors)
tax advantages

Question 6

disadvantage of partnerships?

Answer 6

mutual agency
unlimited liability
relationship among partners fragile

Question 7

partnership agreement includes?

Answer 7

• Either written or verbal agreement
• Partnership name and location
• Nature of the business
• Name, investment and duties of each partner
• Sharing of profits and losses
• Withdrawals (drawings)
• Dispute resolution
• Admission and withdrawal of partners
• Partnership liquidation

Question 8

allocation of P&L consider?

Answer 8

 Services performed
 Capitalinvested
 Business risk assumed

Question 9

common allocation methods of P&L

Answer 9

1. Fixed ratio
2. Fixed ratio based on capital balance
3. Fixed ratio allowing for interest and salary

Question 10

method 1?

Answer 10

capital accounts

Question 11

method 2?

Answer 11

Fixed Capital & Retained Earnings