Review Materials (Multiple Choice)

Question 1

A partnership is

A. Any association of two or more persons or entities
B. An association of two or more persons to carry on a business for a profit, as co-owners
C. Not a separate legal entity for legal purpose → juridical
D. An entity created by following statutory requirements

Answer 1

B. An association of two or more persons to carry on a business for a profit, as co-owners

Question 2

A partnership ends its life when

A. It changes its name
B. Unlimited liability exists
C. A new partner is admitted
D. The partnership incurred losses

Answer 2

C. A new partner is admitted

Question 3

All the following statements are true for both general and limited partnerships EXCEPT

A. both are easily dissolved.
B. both must have at least one general partner.
C. all partners can be personally liable for all debts of the partnership.
D. all partners have the right to participate in the profits of the business.

Answer 3

C. all partners can be personally liable for all debts of the partnership.

Question 4

Which of the following is NOT normally part of the Articles of Partnership?

A. Kind of partners
B. Contribution of partners
C. Profit and loss agreement
D. Kind of creditors

Answer 4

D. Kind of creditors

Question 5

This account represents the partner’s share in the net assets of the partnership

A. Partner’s capital
B. Partner’s deficit
C. Working fund
D. Drawing account

Answer 5

A. Partner’s capital

Question 6

Which of the following does NOT increase the partner’s capital account?

A. Investments to the partnership
B. Share in the partnership’s net income
C. Bonus given by a partner because of one’s partner intangible advantage
D. Share in the partnership’s loss

Answer 6

D. Share in the partnership’s loss

Question 7

Which of the following is not a component of the formula used to distribute income?

A. Salary allocation to those partners working.
B. After all other allocation, the remainder divided according to the profit and loss sharing
ratio.
C. Interest on the average capital investments.
D. Interest on notes to partners.

Answer 7

D. Interest on notes to partners.

Question 8

This schedule shows the variations in the partners interest in the partnership
A. Statement of Financial Position
B. Statement of Partners’ Profit and Loss Distribution
C. Statement of Changes in Partners’ Capital
D. Statement of Partner’s Variable Capital

Answer 8

C. Statement of Changes in Partners’ Capital