PARTNERSHIP AND CORPORATION ACCOUNTING

• Work or services that may either be personal manual efforts or intellectual may also be contributed to a partnership.

  TRUE
• Ownership is easily transferred in a partnership.

  FALSE: not easy because it involves consent from all partners.
• A partnership cannot be established for religious purposes.

  TRUE
• A partnership must always have at least two owners.

  TRUE
• A proprietorship has a limited life whereas a partnership may have an unlimited life.

  FALSE: limited
• Not all of the partners in a general partnership are personally liable for all debts incurred by the partnership.


  FALSE: All partners in general partnership are personally liable for debts.
• A dormant partner is one who does not take active part in the partnership business an isnot known as a partner.

  TRUE
• Accounting for a partnership comes closer to accounting for a sole proprietorship than to accounting for a corporation.

  TRUE
• Partners' drawing accounts have normal credit balances.

  FALSE: debit because its a contra account of partners' equity.
• The manner in which profits are to be shared should be specified in the articles of partnership.

  TRUE
• A partnership should always be constituted in writing.

  FALSE: can be through oral/verbal
• A public instrument needs to be executed when immovable property or legal rights are contibuted to the partnership.

  TRUE
• Mutual agency means that each partner has the right to bind the partnership to contracts.

  TRUE
• As long as the action is within the scope of the partnership, any partner can bind the partnership.

  TRUE
• When the partnership capital is P30,000 or more, the public instrument must be recoded with the SEC.

  TRUE
• A partnership with a capital of less than P30,000 is valid even if it is unregistered with the SEC.

  TRUE
• Two or more persons may form a partnership for the exercise of a profession.

  TRUE
• There can never be a partnership without contribution of money, property, or industry to a common fund.

  TRUE
• Bankruptcy of a partner will dissolve the partnership.

  TRUE
• A partnership involves mutual agency, unlimitedd liability for general partners and limited life.

  TRUE
• A partnership and a corporation cannot form a partnership.

  TRUE
• A de jure partnership is one which has complied with all legal requirements for its establishments.

  TRUE
• In a limited partnership, the general partner's liability is limited to his investment.

  FALSE: the general partner's liability is unlimited.
• The limited partners are liablie only to the extent of their personal contributions.

  TRUE
• One of the partners in a proposed partnership is a multi-millionaire. The stipulation in the articles of partnership that his partner shall be excluded from sharing in the profits of the partnership is valid.

  FALSE: unfairness to social status
• Under the partnership form of business, large amounts of capital can be raised easily.

  FALSE: uneasy because of limitations on transferability of ownership.
• All partners in a general partnership are personally liable for all debts incurred by the partnership.

  TRUE
• An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership.

  FALSE: dis-advantage
• A partnership is a legal entity that separate and apart from its owners.

  TRUE
• A limited partnership normally has one or more general partner whose liability is unlimited.

  TRUE
• The basis of valuation for non-cash investments should be fair market value.

  TRUE
• When a partner invest assets in a partnership, the assets are recorded at the partner's book value.

  FALSE: fair value
• Liabilities related to assets invested in a partnership by a new partner cannot be transferred to the partnership.

  FALSE: when a partner joins, A and L are also transferred.
• A partner who invests assets into a partnership retains control over those specific assets.

  FALSE: assets becomes a part of the partnership
• Penetrante owns and operates a large hardware store in Cabanatuan City that employs about forty-five personnel. She delegates some of the decision making to two supervisors. Penetrante's business is organized as

  SOLE PROPRIETORSHIP
• Jumawan loves to cook. She recieves unqualified praise whenever she prepares a meal for someone. Encouraged by these compliments and eager to put her cullinary talents to good use, Jumawan decides to open a boutique restaurant in Dumaguete City. Since she plans to maintain complete control of the business, she will most likely recognize it as a

  SOLE PROPRIETORSHIP
• A budding entrepreneur wants to start a business but is unsure of the legal form suited for her. Short of cash, she has to take the form that is least expensive and most flexible in terms of decision making and implementation. Which would you recommend?

  COOPERATIVE
• Unlimited liability means


  the owner is responsible for all business debts
• Cabrera inherited a large amount of money from his parents. Cabrera wishes to start his own business in Batangas. His lawyers encourage him to make it a corporation. What dis-advantage of a sole proprietorship are the lawyers trying to avoid?

  Unlimited liability.
• After Russel has maximixed her standby credit limit from the CDO Bank and still cannot cope with the woeking capital needs of her fast-growing business, what is her recourse if she wants her company to continue growing?

  Obtain a partner or form a corporation to access more funds.