PRTNRSH Flashcards
TRUE OR FALSE: the capital contributed should always be equal to the capital credit of that partner upon partnership
FALSE: bonuses or transfer of capital is permitted among partner.
also, partners may also further invest or withdraw to bring their capital ratio equal to a specifically agreed ratio.
PARTNERSHIP FORMATION:
how will the services of an industrial partner be recorded?
Memorandum entry only
Partnership is a contract where _____ persons bind themselves to contribute _____,______,_______ to a common fund, with the intention of ________.
two or more,
money
property
industry
dividing the profits among themselves.
life of a partnership describe as?
Limited Life
What does CAPITALIST PARTNER contribute to the partner?
Cash and/or non-cash asset
what does an INDUSTRIAL PARTNER contribute to the partnership
Services
liabilities of the partners in a partnership describe as
Unlimited Liability
Between partnership and a corporation, which has less legal requirements to form
Partnership
What is the minimum number of a general partner in a partnership?
1
What can increase the capital balance of a partner?
Additional investment and share in the partnership profits
What can decrease the capital balance of a partner?
Withdrawal and share in the partnership losses
PARTNERSHIP FORMATION:
What value should be the first priority in recognizing and measure asset contribution by the partner?
1st: AGREED VALUE
2nd: FAIR VALUE
If 2 sole partnership will join forces to become a partnership, whose set of accounting records will persist for the partnership formation and operation?
any of the ff: so long as the partners agree:
* Books of the 1st sole proprietorship
*Books of the 2nd sole proprietorship
*New set of books
PARTNERSHIP FORMATION: how will the liability assumed by the partnership be measure?
Present value (fair value)
A loan from a partner should be classified as
a loan from a partner should be classified as a LIABILITY OF THE PARTNERSHIP. This is NOT considered as Capital Investment.
TRUE OR FALSE: Partnership Formation, initial capital balances of the partners should always be aligned with their profit/loss ration
FALSE, the capital ration is not the same as the profit/loss ration, unless otherwise stated.
PARTNERSHIP FORMATION: what are the possible ways of realigning the capital balances of a partner when Total Contributed Capital is EQUAL to Total Agreed Capital
TRANSFER OF CAPITAL
regardless whether it is with or without personal cash settlements among the partner.
PARTNERSHIP FORMATION:
what are the possible ways of realignment the capital balances of partner when Total Contributed Capital is GREATER that Total Agreed Capital
Partner will either withdraw assets from partnership or there is a downward revaluation of asset
PARTNERSHIP FORMATION: What are the possible ways of realigning the capital balance when Total Contributed Capital is LESS than Total Agreed Capital
Partners will EITHER invest additional assets from the partnership OR there is an upward revaluation of asset, or there is a goodwill
(goodwill recognition outside of business combi is not allowed under IFRS. Partnership Formation does not constitute Business Combi under IFRS 3.
PARTNERSHIP FORMATION: Wherein the partners agreed to align their Capital balances with the profit and loss ratio, which methods will not change the total capital of the partnership.
BONUS METHOD/TRANSFER OF CAPITAL METHOD will NOT change the total capital balance of the partnership.
This is as opposed to additional investments or withdrawals by a partner(s), which will increase or decrease the total capital of the partnership, respectively.
TRUE OR FALSE: Goodwill is allowed to be recognized in partnership formation and/or dissolution
FALSE:
Internally generated goodwill is not allowed to be recognized as an asset.
Goodwill will only arise from a Business Combi
TRUE OR FALSE:
An industrial partner will not have a capital balance upon partnership formation
TRUE: unless that partner is a capitalist-industrial partner.
Services alone is not recognizable in accordance with conceptual framework of financial reporting.
TRUE OR FALSE:
An Industrial Partner will never have a capital balance.
FALSE:
although they have 0 balance upon formation, they ,ay have a capital balances during the life of the partnership due to their share in the net income of the partnership.
Which among Salary Allowance, Interest Allowance and Bonus Allowance is NOT time proportioned?
BONUS ALLOWANCE is not prorated by the number of months during the reporting year.
In the absence of an agreed loss sharing ratio, what ratio will the partners apply sharing the net loss of the partnership?
Agreed Profit Ratio
In the absence of an Agreed Profit Ratio, what ratio will the partners apply in sharing the net income of the partnership?
The original capital ratio, after providing an amount which is just and equitable to industrial partner.
THRUE OR FALSE:
in the absence of an agreed loss ratio, an industrial partner will be exempt from sharing in the net losses of the partnership
TRUE
These are typically provided to industrial partners in compensation for their SERVICES to the partnership.
Allowance for salaries
These are typically provided to capitalist partners in compensation for their INVESTMENT in the partnership
Allowance for interest
These are typically provided to managing partners as an ADDITIONAL COMPENSATION FOR THEIR CRUCIAL ROLE in the performance of the partnership
Allowance for bonus
TRUE OR FALSE:
Profit and Loss Agreements should always provide for allowance for salaries, interest and bonuses
FALSE:
Profit And loss of the partnership can be shared in whenever way the partners agreed upon. In addition, the lack of an agreed profit and loss ration is also possible.
This type of withdrawal is a withdrawal of investment, not expected to be reinvested in the partnership any time soon
Permanent Withdrawal
This type of withdrawal is done because of the partners share or expected share in the profit of the partnership
Temporary Withdrawal
What account will be debited for a temporary withdrawal
Partner’s Drawing Account
What account will be debited for a permanent withdrawal?
Partner’s Capital Account
What is a typical reason for crediting the drawings account?
Partner’s shar e in the net income of the partnerhsip
In terms of computing the average capital balances, what is the difference between permanent and temporary withdrawals
Permanent withdrawals are included in the computation of average capital balance, while temporary withdrawals are not.
Between Permanent and temporary withdrawals, which i/are included in the computation of the ending capital balance of a partner?
BOTH
Which allowance is generally NOT provided to a partner in the event of a NET LOSS of teh [artnership?
BONUSES
A stipulation that exclude a partner from sharing in the profit is
VOID by the mere definition of a partnership “with the intention of dividing the profit among themselves”
Who will decide what amount constitute “just and equitable share”
The partners shall determine this. However, the court will determine this in the event that the partners cannot agree.
Will industrial partners be liable for loss?
In the absence of agreement, Industrial Partner are not liable for losses.
TRUE OR FALSE:
bonuses are assured to be provided in the event of a net income.
FALSE: although the results of operation resulted to a net income, this does not assure that the basis for the bonus will remain positive.
BONUS is based on the net income after salaries and salaries is greater than the net income.
Partnership Dissolution occurs when _______ or ______
an existing partner retires
new partner admitted
TRUE OR FALSE:
A new partner admitted through a purchase, must purchase their interest from all partners proportionately.
FALSE:
a new partner may purchase their interest from any partner in any ratio, as long as all partner give their consent.
TRUE OR FALSE:
Total Capital of the partnership will not change when a new partner is admitted through purchase of interest.
TRUE: assuming there is no asset revaluation.
this admission will only be recorded as a transfer of capital from original partner to new partner.
How will the partnership record the purchase of interest by a new partner in partnership admission?
The purchase itself is not recorded in the partnership book since this is a personal transaction among the partners.
however, a transfer of capital will be recorded as agreed upon.
If a new partner receives a capital credit that is more than what they paid for in a partnership admission through purchase of interest, how will this gain be recorded in the books of the partnership?
a gain is not recorded in the book of the partnership since this is a personal gain of the new partner/
It is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business.
PARTNERSHIP DISSOLUTION
Is the partnership terminated in a partnership dissolution?
NO, it continues until the winding up of a partnership affairs is completed.
TRUE OR FALSE:
a partner may admitted with only an majority vote from the original partner
FALSE: it requires consent from all the partners, including the new partner
If the total contributed capital is less that the total agreed capital, then _____
there is a positive asset revaluation
