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a loss. Salary and interest allowances are reported in the statem performance as salaries and interest expenses. In certain cases when distribution of profits or losses involves sa allowances, some partners may receive an increase in equity and c a decrease.

a loss. Salary and interest allowances are reported in the statem performance as salaries and interest expenses. In certain cases when distribution of profits or losses involves sa allowances, some partners may receive an increase in equity and c a decrease.

FINANCIAL ACCOUNTING
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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Please answer number 3,7,9 and 10
True or False 1. The equity of a partner in the net assets of the partnership is not the same as the partner's share in profits or losses. 2. It is possible for a partner's capital account to increase as a result of the allocation of a loss. 3. Salary and interest allowances are reported in the statement of financial performance as salaries and interest expenses. 4. In certain cases when distribution of profits or losses involves salary and interest allowances, some partners may receive an increase in equity and others may suffer a decrease. 5. Using average capital balances as a basis for profit distribution is preferable because it reflects the capital actually available for use by the partnership during the year. Temporary withdrawals should be considered even when they are within allowable limits. 6. In the absence of stipulation, the share of each partner in profits or losses shall be in the same proportion to what he may have contributed, but the industrial partner may not be liable for the losses. 7. A partnership agreement may validly stipulate that one partner shall receive no share in profits or losses. 8. The interest on partners' capital can be considered as expenses depending on the partners' agreement. 9. The increase in equity of the partner due to distribution of profits can be attributed to a particular asset. 10. When a profit or loss sharing agreement provides for salary and interest allowances to the partners, these salary and interest allowances should be deducted from revenues in arriving at partnership profit. 11. When ending capital balances are used, additional investments during the year are encouraged.
Transcribed Image Text:True or False 1. The equity of a partner in the net assets of the partnership is not the same as the partner's share in profits or losses. 2. It is possible for a partner's capital account to increase as a result of the allocation of a loss. 3. Salary and interest allowances are reported in the statement of financial performance as salaries and interest expenses. 4. In certain cases when distribution of profits or losses involves salary and interest allowances, some partners may receive an increase in equity and others may suffer a decrease. 5. Using average capital balances as a basis for profit distribution is preferable because it reflects the capital actually available for use by the partnership during the year. Temporary withdrawals should be considered even when they are within allowable limits. 6. In the absence of stipulation, the share of each partner in profits or losses shall be in the same proportion to what he may have contributed, but the industrial partner may not be liable for the losses. 7. A partnership agreement may validly stipulate that one partner shall receive no share in profits or losses. 8. The interest on partners' capital can be considered as expenses depending on the partners' agreement. 9. The increase in equity of the partner due to distribution of profits can be attributed to a particular asset. 10. When a profit or loss sharing agreement provides for salary and interest allowances to the partners, these salary and interest allowances should be deducted from revenues in arriving at partnership profit. 11. When ending capital balances are used, additional investments during the year are encouraged.
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