OPERATION

Question 1

Which of the following accounts is not closed in the closing process for a partnership?

Answer 1

Mr. X, Capital

Question 2

In the absence of an agreement, the share of each partner in the profits and losses shall be

Answer 2

according to original capital contribution

Question 3

The articles of co-partnership should make clear all of the following points, except

Answer 3

taxes paid by the partnership

Question 4

In order to arrive at an equitable manner of distributing profits and losses, any or all of the following factors may be taken in to consideration except

Answer 4

educational attainment of the partners

Question 5

When the partnership agreement specifically provides for salaries and interest, the provision must be applied before the remainder of net income or net loss is divided.

Answer 5

TRUE

Question 6

Net income of a partnership is not taxed as a separate entity

Answer 6

FALSE

Question 7

If the partnership agreement specifies a method for sharing profits, but not losses, then losses are shared in the same proportion as profits.

Answer 7

TRUE

Question 8

Partnership income is to be divided in proportion to each partner’s capital equity interest, unless the partnership contract specifically indicates the manner in which the net income or net loss is to be divided.

Answer 8

FALSE

Question 9

The percentage interest in a partnership is always the same as the profit-sharing ratio.

Answer 9

FALSE

Question 10

It is necessary to set up a drawing account for the industrial partner for the purpose of recording his share in the profits of the partnership.

Answer 10

FALSE

Question 11

An industrial partner is exempt from sharing in partnership losses

Answer 11

TRUE

Question 12

Any salary allowances stipulated in the partnership agreement are considered if income is sufficient to cover such allowances

Answer 12

FALSE

Question 13

Partnership income or loss is shared equally unless the partnership contract specifically indicates the manner in which net income or net loss is to be divided.

Answer 13

FALSE

Question 14

A partnership agreement that provides for a combination of several allocation procedures to be used in the distribution of profit.

Answer 14

Multiple bases of Profit Allocation

Question 15

A temporary account used to summarize the various revenue and expenses, the balance of which may reporesent profit or loss

Answer 15

Income Summary

Question 16

A method of dividing profits which uses as basis the amount of capital invested and the time during which such capital are actually used by the business.

Answer 16

Average Capital

Question 17

An incentive given to the managing partner which is usually a percentage of net income.

Answer 17

BONUS

Question 18

The entire return from the business to the partners for their time, skills, and capital.

Answer 18

Partnerships Profit

Question 19

The compensation given to partners for the ability and time devoted to the business.

Answer 19

Partner’s Salaries

Question 20

A basic financial statement which gives effect to the changes in capital balances of the partners during a specific period

Answer 20

Statement of changes in Partner’s Equity

Question 21

This is prepared in order to classify accounting data in a convenient and orderly manner and to facilitate the preparation of financial statements.

Answer 21

Worksheet

Question 22

The basis or ratio in which the profits or losses are shared by the partners

Answer 22

Profit and Loss Ratio

Question 23

Capital contributions of the partners at the start of the business

Answer 23

Original Capital

Question 24

A permanent part of a partnership income statement not found in that of a sole proprietorship.

Answer 24

Distribution of Profit

Question 25

The account debited for partners’ permanent withdrawals of capital.

Answer 25

Capital Account

Question 26

A ratio expressed in fraction or percentage which has no relation to the amount of capital investment of the partners

Answer 26

Arbitrary Ratio

Question 27

Balances in the capital accounts of partners at the start of each accounting period.

Answer 27

Beginning Capital

Question 28

To compensate for the difference in their capital contributions, partners are allowed this item.

Answer 28

Interest on Investment