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Accounting- Grade 12 > Chapter 13- Partnerships > Flashcards

Chapter 13- Partnerships Flashcards

0
Q

What is the partnership act?

A

Gives basic rules for forming & operating a partnership

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1
Q

What is a partnership?

A

Two or more people who do business to make a profit

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2
Q

What is association of individuals?

A

Assigning roles and responsabilities to members of a partnership. Ex ownership of assets or to be sued

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3
Q

When is division of income determined?

A

When the partnership is formed

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4
Q

If no division of income is stated, how is income split among the partners?

A

Equally

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5
Q

What is the definition of mutual agency

A

When each partner acts for the partnership when doing business for the partnership and the action of one partner is binding on all other partners

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6
Q

What is co-ownership of property?

A

When assets are jointly owned by each partner

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7
Q

If the partnership is disolved, how are the partner’s claims on total assets determined?

A

By the balance in their capital accounts

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8
Q

What is limited life?

A

Any change in ownership will dissolve the partnership

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9
Q

What is unlimited liability?

A

Each partner is liable for the liabilities of the partnership. Creditors have first claim against the assets in the event of liquidation and if not enough assets to pay off liabilities then personal assets must be used

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10
Q

What is a limited partnership?

A

When those partners have limited liability therefore liability is limited to the amount of capital contributed

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11
Q

What are multidisciplinary practices?

A

When lawyers become partners with accoutants or other proffesionals

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12
Q

What is the issue of concern with multidisciplinary practices?

A

Conflict of interest & confidendiality

ex: accountants have public disclosure obligations but lawyers must keep clients’ info private

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13
Q

What are the advantages of a partnership?

A

Combines skills and resources of one or more people
Easy to form
Relatively free from government regulation
Decisions can be made quickly (no board of directors to consult)

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14
Q

What are the disadvantages of a partnership?

A

Mutual agency
Limited life
Unlimited liability (hard to raise large amounts of capital)

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15
Q

What basic info should be reported on the partnership agreement?

A

Name and location of the business
Purpose of the business
Date of inception (beginning)

16
Q

What is the journal entry to record the capital investment of one partner when forming a partnership?

A

Cash
Equipment
Allowance for DA
Owner, Capital

17
Q

What are the steps for the closing entries?

A
  1. Dr Revenue Cr Income summary
  2. Dr Income summary Cr Expenses
  3. Dr Income summary Cr Capital accts
  4. Dr Capital accts Cr Drawings
18
Q

What does the table look like for distribution of net income or loss?

A 
Partners   A    B    C     Total
Salary
Interest
Remainder
Total
19
Q

What is the journal entry to transfer the share of net income/loss?

A

Income Summary
A, Capital
B, Capital
C, Capital

20
Q

What is the journal entry to record the transfer of drawings to owner’s capital?

A 
A, Capital
B, Capital
C, Capital
     A, Drawings
     B, Drawings
     C, Drawings
21
Q

What are the two ways to admit a partner?

A
  1. Purchase the interest of a partner

2. Invest assets in the partnership

22
Q

What is the journal entry to record the admission of a new partner by purchasing interest?

A

Old partner, Capital
Old partner, Capital
New partner, Capital

23
Q

What are the steps to determining a new partner’s equity when being added to the partnership?

A

1) Determine total partnership capital (all capital balances added)
2) Determine new partner’s equity (total partnership capital x interest percentage)
3) Determine the bonus amount (initial investment from new partner–partner’s equity)
4) Allocate bonus to new partner (if negative) or old partners (if positive)

24
Q

What is the journal entry to record the admission of a partner with a bonus to the old partners?

A

Cash
Old Partner, Capital
Old Partner, Capital
New Partner, Capital

25
Q

What is the journal entry for the admission of a partner with a bonus to the new partner?

A

Cash
Old partner, Capital
Old partner, Capital
New partner, Capital

26
Q

What is the journal entry to record the withdrawal of a partner if the other two partners agree to each pay half of the leaving partner’s capital?

A

Leaving partner, Capital
Partner A, Capital
Partner B, Capital

27
Q

What is the journal entry to record the withdrawal of a partner with a bonus to the withdrawing partner?

A

Leaving partner, Capital
Partner A, Capital
Partner B, Capital
Cash

28
Q

What is the journal entry for the withdrawal of a partner with a bonus to the remaining partners?

A

Leaving partner, Capital
Partner A, Capital
Partner B, Capital
Cash

29
Q

What are the four steps when liquidating a partnership?

A

1) Sell assets
2) Distribution of loss/gain for sale of assets
3) Pay liabilities
4) Distribution of cash to partners

30
Q

What is the journal entry for the sale of assets at a loss?

A

Cash
Loss on sale of assets
Assets

31
Q

What is the journal entry to record the distribution of the loss/gain for the sale of assets?

A

Partner A, Capital
Partner B, Capital
Loss on sale of assets

32
Q

What is the journal entry to record the repayment of liabilities?

A

Accounts Payable

Cash

33
Q

What is the journal entry to record the distribution of cash to owners in the case of liquidation?

A

Partner A, Capital
Partner B, Capital
Cash

34
Q

What is the journal entry to record a payment of deficiency during the final step of the liquidation process?

A

Cash
Partner C, Capital

Partner A, Capital
Partner B, Capital
Cash

35
Q

What is the journal entry to record the non-payment of deficiency during the final step of the liquidation process?

A

Partner A, Capital
Partner B, Capital
Partner C, Capital

Partner A, Capital
Partner B, Capital
Cash

Accounting- Grade 12 (16 decks)

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