Partnership Enterprise Accounting Quiz
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Questions and Answers

How is the Cash account of the partnership affected when a partner invests cash?

  • Credited
  • No effect
  • Debited (correct)
  • Depends on the amount invested
  • What is the primary form of organization when two or more individuals engage as co-owners?

  • Corporation
  • Sole proprietorship
  • Partnership (correct)
  • Limited Liability Company
  • What happens to the partner's capital account when an asset other than cash is invested in the partnership?

  • Debited
  • Depends on the market value of the asset
  • Credited (correct)
  • No effect
  • In what situation would a partner's capital account be credited for the difference between the market value of the asset invested and liabilities assumed?

    <p>When a certain amount of money is owed for the asset</p> Signup and view all the answers

    Which form of organization is popular among personal service enterprises and in the legal and public accounting professions?

    <p>Partnership</p> Signup and view all the answers

    What is a capital interest in a partnership?

    <p>An interest that gives the holder a share of the proceeds under certain situations</p> Signup and view all the answers

    What does the capital account of a partner represent?

    <p>The partner's equity in the partnership</p> Signup and view all the answers

    When is the capital account of a partner increased?

    <p>When the owner makes additional investments during the year</p> Signup and view all the answers

    In what form is compensation for services provided to a partner?

    <p>Salary allowance</p> Signup and view all the answers

    How are guaranteed payments for services and capital treated by a partnership?

    <p>As if they were made to increase the capital account</p> Signup and view all the answers

    When is the capital account of a partner decreased?

    <p>When the partner makes withdrawals of cash or property</p> Signup and view all the answers

    What happens to the Drawing account when a partner makes a cash withdrawal received as an allowance?

    <p>It increases by the amount of withdrawal made</p> Signup and view all the answers

    What is included in the net income/loss distribution entry when books are closed at year end?

    <p>Amount of compensation for services and capital</p> Signup and view all the answers

    Which of the following is not a situation where the capital account of a partner is increased?

    <p>Withdrawals made by the partner</p> Signup and view all the answers

    What is considered as guaranteed payments in a partnership?

    <p>Compensation for services and capital</p> Signup and view all the answers

    How are salary and interest allowances recorded in the capital account of a partner?

    <p>They are added to the capital account</p> Signup and view all the answers

    What is the primary purpose of a cash flow statement?

    <p>To show the changes in balance sheet accounts and income</p> Signup and view all the answers

    Who is interested in assessing a company's ability to repay?

    <p>Potential investors</p> Signup and view all the answers

    Which International Accounting Standard deals with cash flow statements?

    <p>IAS 7</p> Signup and view all the answers

    What does the cash flow statement analyze in terms of activities?

    <p>Operating, investing, and financing activities</p> Signup and view all the answers

    Who needs to know whether the organization will be able to cover payroll and other immediate expenses?

    <p>Accounting personnel</p> Signup and view all the answers

    What is the concern of the cash flow statement as an analytical tool?

    <p>Flow of cash in and out of the business</p> Signup and view all the answers

    What is the primary purpose of a cash flow statement?

    <p>To predict future cash flows and borrowing needs</p> Signup and view all the answers

    Which entity mandated that firms provide cash flow statements?

    <p>Financial Accounting Standards Board (FASB)</p> Signup and view all the answers

    What did the manager of Dowlais Iron Company create to explain the lack of funds for investment?

    <p>Comparison Balance Sheet</p> Signup and view all the answers

    What does the cash flow statement exclude based on accrual basis accounting?

    <p>Non-cash transactions</p> Signup and view all the answers

    What was the new financial statement created by the manager of Dowlais Iron Company known as?

    <p>Comparison Balance Sheet</p> Signup and view all the answers

    Which financial statement reveals the quality of a company's earnings?

    <p>Cash Flow Statement</p> Signup and view all the answers

    What does the cash flow statement help predict?

    <p>Future cash flows and borrowing needs</p> Signup and view all the answers

    What did the Financial Accounting Standards Board (FASB) define rules for in 1973?

    <p>Reporting sources and uses of funds</p> Signup and view all the answers

    What was common before accrual basis financial statements?

    <p>Cash basis financial statements</p> Signup and view all the answers

    What was excluded by the cash flow statement based on accrual basis accounting?

    <p>Non-cash transactions</p> Signup and view all the answers

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