TRUE OR FALSE

1. When a profit or loss-sharing agreement provides for salary and interest allowances to the partners, these should first be deducted from revenues in arriving at partnership net income. 2. Unless the partnership agreement specifies otherwise/ profits or losses are divided equally among the partners. 3. A bonus is given to compensate for the difference in their capital contributions. 4. It is impossible for a partner's capital account to increase as a result of an allocation of a Loss. 5. There is generally an increase in equity of a partner during the distribution of profits for the period. 6. If the partnership agreement specifies a method for sharing income, but not losses, then losses are shared in the same proportion as the income. 7. In instances when the distribution of profits or losses involves salary allowances, some partners may receive an increase in equity and others may suffer a decrease. 8. In the absence of a specific agreement, the law provides that partnership income be divided equally among the partners. 9. The salary, interest, and stated ratio method of allocation cannot be applied when a loss has occurred. 10. The provision for interest on partners' capital will not be honored if the operations for the period resulted in a net loss. 11. Original Capital is the capital contribution of the partners at the inception of the partnership. * 12. An adequate accounting system and accurate measurement of income are needed by a partnership because the profit is divided among two or more partners. * 13. When ending capital balances are used in distributing income, additional investments during the year are encouraged. 14. The arbitrary ratio is a ratio expressed in a random fraction or percentage which has no relation to the amount of capital investment of the partners. * 15. Under the capital balance basis of allocating profits, the partner who invested more capital will ultimately suffer a bigger share of the net loss. * 16. If a partnership agreement does not specify how profits or losses are to be distributed, they should be allocated based on ending capital account balances. * 17. The profits or losses of a partnership may be divided based on their capital contribution ratio. * 18. It is always possible to allocate profit or loss to partners based solely on the given stated ratio. * 19. The basis on which profits or losses are shared is a matter of agreement among the partners. It may not necessarily be the same as their capital contribution ratio. * 20. A partnership is restricted to engage in service business only and cannot engage in a trading one. *