Partnership Formation

Question 1

Essence of Partnership?

Answer 1

Profit

Question 2

Theory that states that partnership and partners is one and the same

Answer 2

Proprietary Theory

Question 3

Theory that states that partnership and partners are separate to one another

Answer 3

Entity Theory

Question 4

What transactions will increase capital accounts?

Answer 4

Initial/Original Investment
Addtl Investment
Share in Net Income

Question 5

What accounts will decrease Capital Accounts?

Answer 5

Permanent or capital withdrawal
Drawings in excess of specified amount
Withdrawal of large or irregular account share in net losses
Closing of a net debit balance in the partners drawing account

Question 6

S1: Permanent Withdrawal directly affect capital balance
S2: Personal Withdrawals are known as temporary and can be known as periodic withdrawal also

Answer 6

TRUE
TRUE

Question 7

Non Cash Asset Can be Withdrawn also?
what is the treatment?

Answer 7

Yes.
Book Value -> FV