Partnership Basics
A business where two or more people combine their assets and skills.
What is a partnership?
When a partner invests equipment into the business, what account is debited?
What is Office Equipment?
The statement that shows how net income or loss is divided between partners.
What is the distribution of net income statement?
Cash received from selling assets during liquidation.
What is realization?
A gain on realization is recorded as a credit to this account.
What is Gain on Realization?
Each member of a partnership is called this.
What is a partner?
A partner’s drawing account has this type of normal balance.
What is a debit balance?
If partners divide net income equally and the total is $40,000, each partner receives…
What is $20,000?
The process of paying liabilities and distributing remaining assets to partners.
What is liquidation of a partnership?
A loss on realization is recorded as a debit to this account.
What is Loss on Realization?
A written document describing how a partnership will operate.
What is a partnership agreement?
When a partner withdraws supplies, which account is credited?
What is Supplies?
A partnership distribution of net income is shown on which statement?
What is a separate distribution of net income statement?
If non-cash assets sell for less than book value, this is recorded.
What is a loss on realization?
If partners split gains 60/40 and the gain is $1,000, how much does Partner B (40%) receive?
What is $400?
True or False: A partnership can be formed orally.
What is TRUE?
Journal entry: Sean invests $19,000 cash into the partnership.
Debit Cash; Credit Sean, Capital.
A partnership may divide earnings based on percentages. If Partner A receives 60% of $10,000, how much do they get?
What is $6,000?
When distributing remaining cash to partners, which accounts are debited?
What are the partners’ capital accounts?
When paying creditors $8,500 during liquidation, what is the journal entry?
Debit Accounts Payable; Credit Cash
List any three items typically included in a partnership agreement.
Name of business, partner investments, duties/responsibilities, profit/loss division, procedures if a partner dies, duration of agreement, etc.
Partners may withdraw assets during the fiscal period in anticipation of net income.
What is TRUE?
True or False: A partnership gives limited liability to partners.
What is FALSE?
True or False: Noncash assets cannot be sold for less than book value.
What is FALSE?
During liquidation, after all sales and payments, remaining cash is $51,400. The partners’ capital balances are $25,960 and $25,440. How is cash distributed?
Each partner receives the amount of their ending capital balance (25,960 and 25,440).