Partnership formation and operation

Question 1

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This account is credited initially with the fair value of the partner’s contribution

Answer 1

Capital account

Question 2

A drawing account in partnership is in what side of its journal entry?

Answer 2

Debit

Question 3

What are the ways of forming a partnership?

Answer 3

*Individual + Individual
*Individual + Sole Prop
*Sole prop + Sole prop

Question 4

If cash is contributed, it shall be accounted for as ____

Answer 4

the total amount contributed

Question 5

If cash and non-cash assets are contributed, it shall be accounted for as ____

Answer 5

@fair value

Question 6

What if industry is contributed, how will it be accounted?

Answer 6

Will be recorded in the memorandum entry form

Question 7

Steps of transferring previous books to new set of books includes:

Answer 7

1.) Adjusting
2.) Closing the old records
3.) Open the new book and transfer the records

Question 8

Rules for distribution of profits:

Answer 8

*According to agreement
*No agreement:
CAPITALIST PARTNER: ACCORDING TO CAPITAL
CONTRIBUTION
INDSTRIAL PARTNER: JUST AND EQUITABLE UNDER
THE CIRCUMSTANCES

Question 9

Rules for distribution of losses:

Answer 9

*According to agreement
*If not agreement:
Use the profit sharing
agreement

    If no profit sharing 
    agreement: CAPITALIST PARTNER: CAPITAL CONTRIBUTION

INDUSTRIAL PARTNER: NOT LIABLE FOR ANY LOSSES (but liable for liabilities)

Question 10

If income summary is credited, there is a

Answer 10

Loss

Question 11

Temporary withdrawals made by the partner is posted in ledger as

Answer 11

Partner’s drawing, debit

Question 12

It is usually maintained in a separate drawing account with any excess draws being deducted directly to the capital account

Answer 12

Partner’s drawings

Question 13

Entity theory is

Answer 13

A theory which defines partnership as having its own existence apart from the partnership of