Q. How is the profit-sharing ratio determined when a new partner is admitted?
A.
Equal distribution among all partners
B.
Based on capital contribution
C.
Based on previous profit-sharing ratios
D.
Negotiated among partners
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Solution
The profit-sharing ratio is typically negotiated among partners, considering their contributions and agreements.
Correct Answer:
D
— Negotiated among partners
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Q. What is the correct journal entry for the distribution of profits among partners?
A.
Debit Profit and Loss Account, Credit Partner's Capital Accounts
B.
Debit Partner's Capital Accounts, Credit Profit and Loss Account
C.
Debit Partner's Capital Accounts, Credit Cash
D.
Debit Cash, Credit Partner's Capital Accounts
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Solution
The distribution of profits is recorded by debiting the profit and loss account and crediting the partners' capital accounts.
Correct Answer:
A
— Debit Profit and Loss Account, Credit Partner's Capital Accounts
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Q. What is the effect of a partner's capital contribution on the partnership's equity?
A.
Increases total liabilities
B.
Decreases total assets
C.
Increases total equity
D.
Decreases total equity
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Solution
A partner's capital contribution increases the total equity of the partnership.
Correct Answer:
C
— Increases total equity
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Q. What is the effect of a partner's withdrawal on the trial balance?
A.
Assets increase, Liabilities decrease
B.
Assets decrease, Liabilities increase
C.
Assets decrease, Capital decreases
D.
Assets increase, Capital increases
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Solution
When a partner withdraws, the assets decrease (cash or other assets) and the capital account of the partner decreases.
Correct Answer:
C
— Assets decrease, Capital decreases
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Q. What is the impact of depreciation on the final accounts of a partnership?
A.
Increases net income
B.
Decreases net income
C.
No impact on net income
D.
Increases total assets
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Solution
Depreciation is an expense that reduces the net income of the partnership in the final accounts.
Correct Answer:
B
— Decreases net income
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Q. What is the impact of inventory valuation on the final accounts of a partnership?
A.
Affects only the balance sheet
B.
Affects only the income statement
C.
Affects both the balance sheet and income statement
D.
No impact on final accounts
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Solution
Inventory valuation affects both the balance sheet (as an asset) and the income statement (as an expense).
Correct Answer:
C
— Affects both the balance sheet and income statement
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Q. What is the journal entry for the revaluation of assets when a new partner is admitted?
A.
Debit Revaluation Account, Credit Asset Account
B.
Debit Asset Account, Credit Revaluation Account
C.
Debit Asset Account, Credit Partner's Capital Account
D.
Debit Revaluation Account, Credit Partner's Capital Account
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Solution
The revaluation of assets is recorded by debiting the revaluation account and crediting the respective asset account.
Correct Answer:
A
— Debit Revaluation Account, Credit Asset Account
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Q. What is the journal entry to record the admission of a new partner who brings in cash?
A.
Debit Cash, Credit Partner's Capital Account
B.
Debit Partner's Capital Account, Credit Cash
C.
Debit Cash, Credit Goodwill
D.
Debit Goodwill, Credit Partner's Capital Account
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Solution
When a new partner is admitted and brings in cash, the cash account is debited and the partner's capital account is credited.
Correct Answer:
A
— Debit Cash, Credit Partner's Capital Account
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Q. What is the purpose of preparing a trial balance in partnership accounting?
A.
To determine the profit or loss
B.
To ensure that debits equal credits
C.
To prepare financial statements
D.
To assess the liquidity position
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Solution
The primary purpose of preparing a trial balance is to ensure that the total debits equal the total credits, confirming the accuracy of the ledger accounts.
Correct Answer:
B
— To ensure that debits equal credits
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Q. Which method of inventory valuation is commonly used in partnership accounting?
A.
FIFO
B.
LIFO
C.
Weighted Average
D.
All of the above
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Solution
All methods of inventory valuation can be used in partnership accounting, depending on the agreement among partners.
Correct Answer:
D
— All of the above
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