Which of the following statements relating to financial reports for a partnership is incorrect?
A) Partners' salaries are normally treated as an allocation of profit.
B) Each individual partner's equity in the business is reported separately.
C) Interest on capital contributions is treated as an allocation of profits.
D) Income tax expense is deducted from the partnership profit at the end of the income statement.

Question

Quizplus · Accepted Answer

Income tax expense is not deducted from partnership profit at the end of the income statement, as partnerships are pass-through entities, meaning that the profits or losses are allocated to the individual partners who then pay taxes on their share of the income. Therefore, income tax is not shown as an expense on the income statement of a partnership.

Which of the Following Statements Relating to Financial Reports for a Partnership