Answered: Black and Blue formed a partnership,…

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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Question

Black and Blue formed a partnership, agreeing to share profits equally. After closing entries, the balances in their capital accounts are P36,000 and P45,000, respectively. Blue sells her interest in the partnership to White for P52,000. The entry on the partnership books to record this event includes a: a. debit to cash for P52,000 b. credit to White, capital for P45,000 c. credit to White, capital for P52,000 d. debit to Blue, capital for P3,500

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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