Questions and Answers
When a partner invests an asset other than cash, what happens to the partner's capital account?
It is credited for the market value of the asset
In a partnership, if a partner invests cash, what happens to the Cash account of the partnership?
It is debited
What type of accounts are maintained for each partner in a partnership?
Separate capital and drawing accounts
What type of enterprises is a partnership popular among?
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If a certain amount of money is owed for an asset invested by a partner, what may the partnership do?
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Study Notes
Partnership Accounting
- When a partner invests an asset other than cash, the partner's capital account is increased by the fair market value of the asset.
- When a partner invests cash, the Cash account of the partnership is increased by the amount of cash invested.
- Separate capital accounts are maintained for each partner in a partnership to track their individual investments and shares of profits and losses.
- Partnerships are popular among small and medium-sized enterprises, such as family businesses, professional services, and start-ups.
- If a partner invests an asset and an amount of money is owed for that asset, the partnership may assume the liability and record it as an expense.
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Description
Test your knowledge of partnership accounting with this quiz. Learn about the important features and accounting procedures for partnerships, including initial investments, profit sharing, and financial reporting. Ideal for individuals studying business, finance, or accounting.
