Class Review (True or False and Multiple Choice)

Question 1

Under the direct method, the Income Summary account is closed to

A. Capital accounts of the partners.
B. Drawing accounts of the partners.
C. Income Summary account.
D. Any nominal account of the partnership.

Answer 1

A. Capital accounts of the partners.

Question 2

Industrial partners do not have drawing accounts since they do not share in the partnership’s
losses. True or False?

Answer 2

False. All partners have their own drawing accounts.

Question 3

In computing for peso month averages, all investments and withdrawals made by the partner are
considered. True or False?

Answer 3

False. Temporary withdrawals are not considered.

Question 4

When a partnership suffers a net loss, the partners are not entitled to

A. Bonus
B. Salary Allowances
C. Capital Interest
D. They are entitled to all the options stated.

Answer 4

A. Bonus