Partnership-FORMATION

What is partnership?

• When you own a company

• When you get paid

• A public company

• When there are two or more partners carrying out a company

What happens if there is no partnership agreement in writing?

• The partnership will be forced to cease trading

• Nothing

• Section 26 of the Partnership Act 1961 will automatically apply

• The partners must write to the government

Which is NOT an advantage of forming a partnership?

• Unlimited liability for debts

• More finance than a sole trader and more borrowing power

• Share of managerial tasks

• Greater variety of skills and strengths

How many people can form a Partnership?

• 2 only

• 2-20

• 2-5

• 2-22

Which of the following statement is true?

• Partner’s salaries appear in the statement of profit or loss

• Loan interest paid to a partner for his or her own use should not treated as drawings

• Goods taken by a partner for his or her own use should not treated as drawings

• A current account is used to record the profits retained in the business by a partner

The correct entry for the partners’ drawings has been made in the cash account. What entry is needed to complete the posting for the partners’ drawings?

• A debit entry in the partners’ capital accounts

• A credit entry in the partners’ capital accounts

• A debit entry in the partners’ current accounts

• A. A credit entry in the partners’ current accounts

Senrose and Aifa are in partnership, sharing profits and losses in the ratio 2:1. The statement profit or loss reports a net profit of $17,400. Interest on drawings has been calculated as $670 for Senrose and $818 for Aifa. Senrose is entitled to a salary of $6,000 . What is Aifa’s share of profit?

• $8,592

• $4,296

• $7,304

• $5,800