Answered: A, B and C collected money among…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A, B and C collected money among themselves to purchase lotto ticket for the purpose of dividing the winnings among themselves. Is there a partnership formed among them?

A. No, because there is no contribution of money, property or services among them.

B. Yes, because there is contribution of money among the parties with the intention of dividing the winnings among them.

C. No, because their agreement was not put in writing.

D. Yes, because the profit is divided equally among them.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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