A partnership agreement may validly stipulate that one partner shall receive no share in profits or losses.

True

False

Clear selection

In the absence of a specific agreement, the law requires that partnership profits be divided equally among the partners.

True

False

Clear selection

If a partnership agreement does not specify hoe profits or losses are to be distributed they should be allocated based on relative capital account balances.

True

False

Clear selection

It is possible to allocate profit or loss to partners based solely on interest.

True

False

Clear selection

The interest on partners capital can be considered as expense depending on the partners agreement.

True

False

Clear selection

In the absence of any agreement, salary allowances shall be provided even when operation yielded losses.

True

False

The increase in equity of the partners due to distribution of profits can be attributes to a particular asset.

True

False

The use of salaries in the allocation of profit or loss allows for the differences in the services that partners provide the business.

True

False

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.

True

False

Clear selection

When ending capital balances are used, additional investments during the year are encouraged.

True

False

When beginning capital balances are used in allocating profits, year-end investments are discouraged.

True

False

Partnership profits and losses are divided among partners according to their sharing agreement. If no sharing agreement exist, profits or losses are divided equally.

True

False

When the loss is closed into the partners capital accounts, income summary is credited.

True

False

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.

True

False

Clear selection

The equity of a partner in the net assets of the partnership is not the same as the partners share in profits or losses.

True

False

Clear selection

The profits or losses shall be distributed in conformity with the agreement. If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.

True

False

It is possible to allocate profit or loss to partners based solely on the stated ratio.

True

False

Salary and interest allowances are reported in the statement of comprehensive income as salaries and interest expenses.

True

False

Clear selection

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.

True

False

Clear selection

When salary and interest allocation exceed profit, a loss has occurred.

True

False

The provision for interest on partners capital will not be honored because the operations resulted to a loss even if the agreement provided for such interest.

True

False

The form and content of the statement of comprehensive income of a partnership resemble those of a sole proprietorship with no exceptions.

True

False

The basis on which profits or losses are shared is a matter of agreement among the partners and may not necessarily be the same as their capital contribution ratio.

True

False

A stipulation that excludes one or more partners from any share in the profits or losses is valid.

True

False

Profits or losses are divided equally among the partners unless the partnership agreement specifies otherwise.

True

False

The basis for distribution of profits or losses is a matter of agreement among the partners. It may be based on their capital contribution ratio.

True

False

The salary allocation to partners also appears as salaries expense on the partnerships statement of comprehensive income.

True

False

Under the pure capital ratio plan of allocating profits, the partner who invested more capital will ultimately shoulder a bigger share of the loss.

True

False

It is possible to allocate profit and loss to partners based solely om salaries.

True

False

It is possible for a partners capital account to increase as a result of the allocation of a loss.

True

False

Clear selection

The salary, interest and stated ratio method of allocation cannot be applied when loss has occurred.

True

False

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.

True

False

Clear selection

Interest on loans from partners is recognized as partnership income.

True

False

The income summary account is credited in the entry to record distribution of profits.

True

False

A partnership contract should be drawn up at the end of each year, prior to distributing profit to the partners.

True

False