ACCOUNTING FOR PARTNERSHIP
- 1. Identify the characteristic of the partnership form of bussiness organization.
The principal characteristic of a partnership are: a) accociation of individuals, b) mutual agency, c) limited life, d) unlimited liability, e) co-ownership of property
- 2. Explain the accounting entries for formation of partnership
When a partnership is formed, each partner initial investment should be recorded of the fair market value of the assets at the date of their transfer to the parnership.
- 3. Identify the bases for dividing net income or net loss.
net income or net loss is divided on the basis of the income ratio , which Maybe a) a fixed ratio, b) ratio based on begining or average capital balance , c) salary to partners and a remainder on a fixed ratio , d) interest on partner capital and the remainder on afixed ratio, e) salaries to partner, interest on partner capital and the remainder on a fixed ratio.
- 4. Describe the form and the content of partnership financial statement.
The financial statement of a partnership are similar to those of the proprietorship the principal difference are : a) the division of net income is shown of the income statement ,b)the owners equity statement is called the partner capital statement and c) each partner capital is reported on the balance sheet.
- 5. Explain the effect of the entries to record the liquidation of a partnership.
When a partnership is liquidated. It is neccesary to record the , a) sale of the non cash assets, b) allocation of the gain or loss on realization, c) payment of partnership liabilities and d) distribution of cash to the partners on the basis of their capital balances.
(Accounting principal ; weygandt, kimmel, kiesso)