True or False1. The equity of a partner in the net assets of the partnership is not the same as thepartner's share in profits or losses.2. It is possible for a partner's capital account to increase as a result of the allocation ofa loss.3. Salary and interest allowances are reported in the statement of financialperformance as salaries and interest expenses.4. In certain cases when distribution of profits or losses involves salary and interestallowances, some partners may receive an increase in equity and others may suffera decrease.5. Using average capital balances as a basis for profit distribution is preferable becauseit reflects the capital actually available for use by the partnership during the year.Temporary withdrawals should be considered even when they are within allowablelimits.6. In the absence of stipulation, the share of each partner in profits or losses shall be inthe same proportion to what he may have contributed, but the industrial partnermay not be liable for the losses.7. A partnership agreement may validly stipulate that one partner shall receive noshare in profits or losses.8. The interest on partners' capital can be considered as expenses depending on thepartners' agreement.9. The increase in equity of the partner due to distribution of profits can be attributedto a particular asset.10. When a profit or loss sharing agreement provides for salary and interest allowancesto the partners, these salary and interest allowances should be deducted fromrevenues in arriving at partnership profit.11. When ending capital balances are used, additional investments during the year areencouraged.

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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.

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

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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In a partnership, a capital deficiency occurs for a partner when Options: • His share in the losses of the partnership is more than his capital balance • Loan payable by the partnership to him greater than his capital balance • His solvency is lesser than his capital balance • His personal assets are less than his personal liabilities
NOTE AI ANSWER EXPERT SOLUTION
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