Accounting Study Set 8

Business

Quiz 12 :
Accounting for Partnershipsand Limited Liabi Ity Companies

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Quiz 12 :
Accounting for Partnershipsand Limited Liabi Ity Companies

Partnership Agreement: Robbins is not acting in a ethical manner. Barrow should negotiate the agreement by -: 1. As Borrow is spending more time he should be given a salary allowance out of the profits; This would help in rewarding more to Barrow who has invested substantial time and energy. 2. The remaining income shall be divided either equally or any predetermined ratio.

(a) A Proprietorship is a company owned by a single individual. The main advantages of Proprietorship are: simple to form and not taxable. (b) A Partnership is an association of two or more persons who own and manage a company for profit. The main advantages of Partnership are: Moderate to form, not taxable and participation in income and loss. (c) A Limited Liability Company (LLC) is a form of legal entity that provides limited liability to its owners, but is treated as a partnership for tax purposes. The main advantages of Limited Liability Company are: Moderate to form, limited legal liability and not taxable.

Partnership Partnership is an arrangement which refers to two or more parties joining hands together and contributes the capital in mutually agreed ratio and agrees to carry on some business and thus share the profits from that partnership in the ratio of either capital investment or at some agreed ratio. The N partner's investment is recorded in the journal book as shown below. img Working notes: 1. Amount of account receivable that is to be recorded in the journal book is calculated as below. img Hence, the net account receivable is img 2. Merchandise inventory is to be recorded at the current market price which is given as $104,300. 3. Equipment is to be recorded at $84,500.

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