Which of the following statements is true of partnership?
A)If the partners have no partnership agreement specifying how to divide profits and losses, then they share equally.
B)It is legally required to share the profit and losses equally, irrespective of the partnership agreement.
C)The stated ratio of profit sharing needs to be approved by the SEC.
D)The profit sharing is always based on each partner's capital balances and any losses will be shared equally.

Question

Quizplus · Accepted Answer

If the partners do not have a specific partnership agreement dictating how profits and losses will be divided, they will default to sharing them equally. However, if a partnership agreement exists, it can specify any ratio of profit and loss sharing that the partners agree upon. The SEC does not regulate or approve partnership agreement clauses, and losses may also be divided based on the partnership agreement's terms.

Which of the Following Statements Is True of Partnership