Which of the following statements is true about a partnership?
A)One capital and one drawing account is used for each partnership.
B)A separate capital account is used to record each partner's investment and that partner's designated share of the earnings.
C)Partnerships are subject to separate business income taxes.
D)The drawing account is closed to retained earnings at the end of the period.

Question

Quizplus · Accepted Answer

Each partner in a partnership has their own capital account that records their initial investment and their designated share of the earnings or losses. The drawing account is used to record withdrawals by the partner and is not closed to retained earnings at the end of the period. Partnerships are not subject to separate business income taxes, as the income is passed through to the individual partners and taxed on their personal income tax returns. Choice A is incorrect because each partner has their own capital account. Choice C is incorrect because partnerships are not subject to separate business income taxes. Choice D is incorrect because the drawing account is not closed to retained earnings.

Which of the Following Statements Is True About a Partnership