Which of the following statements best describes accounting for a partnership?
A)A partnership may be a profit or a nonprofit entity.
B)A partnership may use federal income tax rules to account for transactions in their journals and ledger accounts.
C)A partnership's equity section contains both capital and retained earnings accounts.
D)A partnership may only distribute money through a dividend payment.

Question

Quizplus · Accepted Answer

Partnerships may use federal income tax rules to account for transactions, which allows for consistency with tax reporting requirements. Partnerships do not have retained earnings or issue dividends like corporations; instead, they have partners' capital accounts and distribute profits directly to partners.

Which of the Following Statements Best Describes Accounting for a Partnership