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Partnership Fundamentals Quiz
Test your knowledge of partnership principles with our comprehensive quiz designed for aspiring accountants, business students, and anyone interested in understanding partnerships. Explore essential concepts, including profit sharing, capital contributions, and accounting methods!
- 30 challenging multiple-choice questions
- Assess your understanding of partnership operations
- Learn key facts about partnership agreements and legalities
A partnership is basically a
Benevolence oriented organization
Loss oriented business
Profit oriented business
Profit and loss oriented business
Which of the following statements best describes the fundamentals of the partnership's profit or loss dirstribution?
Profit or loss taken only by one owner
Profit or loss distributed based on the number of partners
Profit or loss allocated based on the partners' agreement
Profit or loss divided by capital contribution
The accounting method used for partnership operation is
Accrual Method
Cash Method
Fair Market Value Method
Cost Method
If partner's personal expenses are paid by the partnership, the payment is charge to be
Partner's drawing account
Partnership's expense account
Partner's expense account
Partnership's nominal account
The following partner would share in the losses of the partnership, except
Limited Partner
Industrial Partner
Capitalist Partner
General Partner
Which of the following partners would receive a profit share equal to the share of a capitalist partner having the smallest profit ration in the absence of profit agreement?
Capitalist Partner
Industrial Partner
Nominal Partner
Silent Partner
The computation of the partners’ share in the profits and losses of the partnership becomes more complex because of the
Differences in capital contribution
Abilities and talents of individual partners
Time spent on partnership by the individual partners
All of the Above
In the absence of any agreement, profits and losses are divided
Equally
Based on ending capital
No distribution of profit or losses
Based on Contributed Capital
The total assets of the partnership may increase upon admission of a new partner by purchase of interest.
True
False
Admission of a new partner by investment will change total assets and total capital.
True
False
Which of the following will not result in the dissolution of a partnership?
Incapacity of a partner
Negative capital balance of a partner
Bankruptcy of a partner
Admission of a new partner
When a partner invests non-cash assets into the partnership, these assets should be recorded at
Their book value
Their original cost to the previous owner
Their fair market value
The value assigned by the contributing partner
Two or more persons may form a partnership for the exercise of a profession
True
False
Partners' investments may include which of the following?
Cash
Non-Cash Assests
Non-Cash Assets with attached liabilities assumed by the partnership
All of the above
A partner whose liability for partnership debts is only to the extent of what he has invested in the partnership is called a/an
General Partner
Limited Partner
Industrial Partner
Nominal Partner
Which of the following is not a characteristic of partnerships?
Voluntary Association
Mutual Agency
Limited Liability
Limited Life
On January 1, 2021, Aga and Ace formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Aga contributed a parcel of land that cost him P100,000. Ace contributed P400,000 cash. The land was sold for P180,000 immediately after the formation of the partnership. What amount should be recorded in Aga's capital account for his investment?
150,000
174,000
180,000
100,000
If there is agreement as to the distribution of profit but no stipulations as to the distribution of loss, any partnership loss shall be shared by partners
Equally
Based on profit ratio
Proportion to his capital contribution
None of the above
What is cash flow?
Cash flow = profit + depreciation + depletion
Cash flow = profit - depreciation
Cash flow = gross income + depreciation + depletion
Cash flow = gross income - depreciation + depletion
Bess and Gail executed a partnership agreement that lists the assets contributed by the partners as follows: Bess, cash of P20,000 and furniture and equipment worth P15,000; Gail, cash of P30,000, inventory and building valued at P15,000 and P40,000, respectively. The building is subject to a mortgage of P10,000, which the partnership assumed. What amounts should be credited to the capital of Bess and Gail, respectively?
35,000 and 85,000
55,000 and 50,000
35,000 and 75,000
60,000 and 60,000
On April 30, 2020, Azon, Apin and Bern formed a partnership by combining their assets. Azon contributed cash of P50,000. Apin invested property with a book value of P36,000, a P40,000 original cost, and a fair value of P80,000. The partnership assumed the P35,000 mortgage liability attached to the property. Bern contributed equipment with a book or carrying value of P30,000, original cost of P75,000, and a fair value of P55,000. Who among the partners will be credited with the highest amount to his/her capital account?
Azon
Apin
Bern
All partners' capital account balances are equal
A partnership should always be constituted in writing
True
False
When the partnership capital is P3,000 or more, the public instrument must be recorded with the Securities and Exchange Commission.
True
False
One of the partners in a partnership is a multi-millionaire. The provision in the partnership contract that this partner shall be excluded from sharing in the partnership profits is valid.
True
False
A partnership with a capital of P3,000 or more is valid even if it is not registered with the Securities and Exchange Commission.
True
False
A partnership has a limited life because any change in the relationship of the partners dissolves the partnership.
True
False
A ratio of 1:3:2 is the same as
10%: 30%: 20%
1/10: 3/10: 2/10
1/6: 1/2: 1/3
20%: 50%: 30%
At the beginning of 2020, the statement of financial position for R & R Company showed the capital balances of the partners as follows: Rev, P24,000 and Rio, P26,000. They share profits and losses in the ratio of 3:7 to Rev and Rio, respectively. During the year, the firm incurred a loss of P40,000. The withdrawals during the year were: Rev, P10,000, and Rio, P18,000. What is the capital balance of Rev on Dec 31, 2020?
3,600
2,000
12,000
26,000
Periodic withdrawals by partners are best viewed as
Expense of doing business
Taxable income to the partners
Distribution of partnership assets to the partners
Payment for partners' personal services to the partnership
Which of the following items in the property, plant, and equipment section of the statement of financial position are not depreciated?
Land
Used Equipment
11-year-old Building
New Equipment
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