BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Proportionate to a partner’s capital contribution
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The percentage % of equity that a partner has on the net assets
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May not be proportionate to capital contribution due to bonus
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All of the above
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Detailed explanation-1: -A partnership is the relationship between two or more people to do trade or business. Each person contributes money, property, labor or skill, and shares in the profits and losses of the business. Publication 541, Partnerships, has information on how to: Form a partnership.
Detailed explanation-2: -Interest on partner’s capital is an expense to the firm and hence debited to profit and loss appropriation A/c. On the other hand it is an income for partners and hence credited to partner’s capital A/c.
Detailed explanation-3: -General Partner: May contribute capital and expertise to the partnership.
Detailed explanation-4: -Business partnership capital can come from both silent partners and general partners. General partners are responsible for managing the business or investment portfolio. General partners usually provide some capital to the business but they also rely on capital investments from limited partners.