Summary of Study Objectives

Summary of Study Objectives - interest on partners’...

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Summary of Study Objectives 1 Identify the characteristics of the partnership form of business organization. The principal characteristics of a partnership are: (a) association of individuals, (b) mutual agency, (c) limited life, (d) unlimited liability, and (e) co-ownership of property. 2 Explain the accounting entries for the formation of a partnership. When a partnership is formed, each partner’s initial investment should be recorded at the fair value of the assets at the date of their transfer to the partnership. 3 Identify the bases for dividing net income or net loss. Net income or net loss is divided on the basis of the income ratio, which may be (a) a fixed ratio, (b) a ratio based on beginning or average capital balances, (c) salaries to partners and the remainder on a fixed ratio, (d) interest on partners’ capital and the remainder on a fixed ratio, and (e) salaries to partners,
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Unformatted text preview: interest on partners’ capital, and the remainder on a fixed ratio. 4 Describe the form and content of partnership financial statements. The financial statements of a partnership are similar to those of a corporation. The principal differences are: (a) the division of net income is shown on the income statement, (b) the owners’ equity statement is called a partners’ capital statement, and (c) each partner’s capital is reported on the balance sheet. 5 Explain the effects of the entries to record the liquidation of a partnership. When a partnership is liquidated, it is necessary to record the (a) sale of noncash assets, (b) allocation of the gain or loss on realization, (c) payment of partnership liabilities, and (d) distribution of cash to the partners on the basis of their capital balances....
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 201 taught by Professor - during the Spring '11 term at Montgomery.

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Summary of Study Objectives - interest on partners’...

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