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Questions and Answers
Which type of account is used to record the share of profits or losses by the partner in a partnership firm?
Which type of account is used to record the share of profits or losses by the partner in a partnership firm?
- Deposit account
- Reserve account
- Current account (correct)
- Capital account
What is the primary purpose of preparing a partnership account?
What is the primary purpose of preparing a partnership account?
- To distribute profits among partners (correct)
- To calculate individual partner's tax liability
- To comply with regulatory requirements
- To determine the market value of the partnership firm
In partnership accounting, what does the term 'guarantee against loss' refer to?
In partnership accounting, what does the term 'guarantee against loss' refer to?
- A partner's assurance of covering any losses incurred by the firm (correct)
- A provision for sharing profits to offset potential losses
- A promise by the firm to compensate for any losses suffered by a partner
- A legal agreement to prevent partners from incurring losses
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Study Notes
Partnership Accounts
- A Current Account is used to record the share of profits or losses by the partner in a partnership firm.
Purpose of Partnership Account
- The primary purpose of preparing a partnership account is to ascertain the profit sharing ratio among partners and to determine the balance of capital accounts.
Guarantee Against Loss
- In partnership accounting, the term 'guarantee against loss' refers to a partner's promise to compensate the other partners for any loss that may occur due to their actions or decisions.
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