32 Questions
How is the Cash account of the partnership affected when a partner invests cash?
Debited
What is the primary form of organization when two or more individuals engage as co-owners?
Partnership
What happens to the partner's capital account when an asset other than cash is invested in the partnership?
Credited
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?
When a certain amount of money is owed for the asset
Which form of organization is popular among personal service enterprises and in the legal and public accounting professions?
Partnership
What is a capital interest in a partnership?
An interest that gives the holder a share of the proceeds under certain situations
What does the capital account of a partner represent?
The partner's equity in the partnership
When is the capital account of a partner increased?
When the owner makes additional investments during the year
In what form is compensation for services provided to a partner?
Salary allowance
How are guaranteed payments for services and capital treated by a partnership?
As if they were made to increase the capital account
When is the capital account of a partner decreased?
When the partner makes withdrawals of cash or property
What happens to the Drawing account when a partner makes a cash withdrawal received as an allowance?
It increases by the amount of withdrawal made
What is included in the net income/loss distribution entry when books are closed at year end?
Amount of compensation for services and capital
Which of the following is not a situation where the capital account of a partner is increased?
Withdrawals made by the partner
What is considered as guaranteed payments in a partnership?
Compensation for services and capital
How are salary and interest allowances recorded in the capital account of a partner?
They are added to the capital account
What is the primary purpose of a cash flow statement?
To show the changes in balance sheet accounts and income
Who is interested in assessing a company's ability to repay?
Potential investors
Which International Accounting Standard deals with cash flow statements?
IAS 7
What does the cash flow statement analyze in terms of activities?
Operating, investing, and financing activities
Who needs to know whether the organization will be able to cover payroll and other immediate expenses?
Accounting personnel
What is the concern of the cash flow statement as an analytical tool?
Flow of cash in and out of the business
What is the primary purpose of a cash flow statement?
To predict future cash flows and borrowing needs
Which entity mandated that firms provide cash flow statements?
Financial Accounting Standards Board (FASB)
What did the manager of Dowlais Iron Company create to explain the lack of funds for investment?
Comparison Balance Sheet
What does the cash flow statement exclude based on accrual basis accounting?
Non-cash transactions
What was the new financial statement created by the manager of Dowlais Iron Company known as?
Comparison Balance Sheet
Which financial statement reveals the quality of a company's earnings?
Cash Flow Statement
What does the cash flow statement help predict?
Future cash flows and borrowing needs
What did the Financial Accounting Standards Board (FASB) define rules for in 1973?
Reporting sources and uses of funds
What was common before accrual basis financial statements?
Cash basis financial statements
What was excluded by the cash flow statement based on accrual basis accounting?
Non-cash transactions
Test your knowledge of the accounting procedures and features of partnerships. Learn about initial investments, capital accounts, and ownership rights in a partnership.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
