PARTNERSHIP FORMATION - Theories Pt 1

True Explanation A limited partnership must have at least on general partner.

All partnerships have at least one general partner.

False Explanation Partnership except general professional partnerships are subject to 30% income tax.

All partnerships are subject to income tax.

True

A partnership is much easier and less expensive to organize than a corporation.

False Explanation A partnership is created by an oral or written agreement.

A written partnership contract is required to be prepared whenever partnership is formed.

False Explanation Partnership may either us the books of one of the sole proprietors or open a new set of books for the partnership.

A newly organized partnership should always open a new set of books.

False Explanation When industry is contributed into the partnership, a memorandum entry is prepared.

A partner's contribution in the form of industry or service is recorded by debiting the account "industry"

True

A partner's contribution in the form of non-cash assets should be recorded at its fair market value in the absence of an agreed value.

True

A partnership is always owned by at least two individuals.

True

Before a partnership can operate legally, it has to first comply with registration requirements of the SEC, DTI, BIR, SSS and Mayor's office.

False Explanation Accumulated Depreciation is carried on the partnership books.

Contra accounts, like allowance for uncollectible accounts and accumulated depreciation, on non cash assets by partners are always carried on the partnership books.

True Explanation Any partner may act as agent of the partnership in conducting its affairs.

Each partner generally has the authority to enter into contracts which are binding upon the partnership.

False Explanation Partnership is separate and distinct from its owners. No personal assets shall be combined to the assets of the partnership.

For financial reporting purposes, the personal assets and debts of a partner should be combined with the assets and debts of the business.

True

Goodwill may be recognized upon partnership formation when the capital credited to a partner exceeds the fair value of the net assets transferred from previous sole proprietorship business.

True

In a partnership, an owner's equity account exists for each partner.

True

In the partnership books, there are as many capital and drawing accounts as there are partners.

True

Net asset adjustments are made on a sole proprietor's books, when these are to be used as partnership books, for the purpose of arriving at agreed values.

True

Partners are personally liable for the liabilities of the partnership if the partnership is unable to pay.

True Explanation Property contributed to the partnership are owned by the partnership by virtue.

The property invested in a partnership by a partner becomes the property of the partnership.

True

The unlimited liability of partners for partnership debts makes the partnership more reliable from the point of view of creditors.

False Explanation There is no limited partners in a general co-partnership.

There is a required number of limited partners in a general co partnership; in the same manner that, there is a required number of general partners in a limited partnership.