Module 15 Flashcards
1
Q
What is a fixed capital account?
A
record the capital contributed to the business. not altered by accumulating profit/losses
2
Q
What is a current account?
A
record each partners share of the profits or losses at the end of the year
3
Q
What are two possible profits may be divided amongst partners?
A
- profit sharing ratio
- interest on capital left in the business
4
Q
What happens when partners leave or join?
A
creates a new business
5
Q
What should happen when a membership change occurs?
A
- assets and liabilities should be revealed
- departing partner will receive cash to extinguish capital account or leave in the business as a loan (becoming a loan creditor)
6
Q
What is goodwill?
A
represents the fair value of a business in excess of its accounting carrying value.
7
Q
how is goodwill accounted for when there is a change of membership?
A
all existing partners will receive their share of the goodwill asset
