OPERATION Flashcards
Which of the following accounts is not closed in the closing process for a partnership?
Mr. X, Capital
In the absence of an agreement, the share of each partner in the profits and losses shall be
according to original capital contribution
The articles of co-partnership should make clear all of the following points, except
taxes paid by the partnership
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
educational attainment of the partners
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.
TRUE
Net income of a partnership is not taxed as a separate entity
FALSE
If the partnership agreement specifies a method for sharing profits, but not losses, then losses are shared in the same proportion as profits.
TRUE
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.
FALSE
The percentage interest in a partnership is always the same as the profit-sharing ratio.
FALSE
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.
FALSE
An industrial partner is exempt from sharing in partnership losses
TRUE
Any salary allowances stipulated in the partnership agreement are considered if income is sufficient to cover such allowances
FALSE
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.
FALSE
A partnership agreement that provides for a combination of several allocation procedures to be used in the distribution of profit.
Multiple bases of Profit Allocation
A temporary account used to summarize the various revenue and expenses, the balance of which may reporesent profit or loss
Income Summary
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.
Average Capital
An incentive given to the managing partner which is usually a percentage of net income.
BONUS
The entire return from the business to the partners for their time, skills, and capital.
Partnerships Profit
The compensation given to partners for the ability and time devoted to the business.
Partner’s Salaries
A basic financial statement which gives effect to the changes in capital balances of the partners during a specific period
Statement of changes in Partner’s Equity
This is prepared in order to classify accounting data in a convenient and orderly manner and to facilitate the preparation of financial statements.
Worksheet
The basis or ratio in which the profits or losses are shared by the partners
Profit and Loss Ratio
Capital contributions of the partners at the start of the business
Original Capital
A permanent part of a partnership income statement not found in that of a sole proprietorship.
Distribution of Profit
The account debited for partners’ permanent withdrawals of capital.
Capital Account
A ratio expressed in fraction or percentage which has no relation to the amount of capital investment of the partners
Arbitrary Ratio
Balances in the capital accounts of partners at the start of each accounting period.
Beginning Capital
To compensate for the difference in their capital contributions, partners are allowed this item.
Interest on Investment
