Module 15

Question 1

When did the partnership act come into affect?

Answer 1

1890

Question 2

When is the partnership act default?

Answer 2

If no partnership agreement

Question 3

Partnership agreements involve?

Answer 3

Salaries (not an expense)
Interest on capital (not and expense)
Profit/loss share ratio (always do last)

Question 4

When there is a change in members (partners) you?

Answer 4

Transfer current a/c to capital a/c

Question 5

New members in a partnership constitute a new

Answer 5

Business so new PSR

Existing members use old PSR

Question 6

A change in membership requires what?

Answer 6

Revaluation or net assets (capital)

Question 7

What are the two types of goodwill?

Answer 7

Inherent (never permitted to stay in accounts)

Purchased

Question 8

Revolution accounts for partnerships is

Answer 8

Temporary

Question 9

What are the 3 journal entries for a leaving member?

Answer 9

Dr net current assets
Cr revaluation a/c

Dr revaluation a/c
Cr capital a/c P1 and P2 (old PSR)

Dr capital a/c P1
Cr bank or loan

Question 10

What are the 2 journal entries of introducing a new member?

Answer 10

Dr current a/c
Cr capital a/c of remaining partner

Dr bank
Cr capital a/c of new member

Question 11

What could be an example of goodwill?

Answer 11

Good reputation

Strong customer base

Question 12

Goodwill comes

Answer 12

In on the old PSR

Out on the new PSR

Question 13

Journal entry for introducing goodwill?

Answer 13

Dr Goodwill
Cr P1
Cr P2

Question 14

Journal entry for removing goodwill?

Answer 14

Dr P1
Dr P3 (new partner paying off old partners share)
Cr Goodwill

Question 15

What is the order or calculation of goodwill?

Answer 15

1. Revaluation a/c
2. Introduce new partner
3. Remove goodwill

Question 16

What is the revaluation journal entries?

Answer 16

Dr Asset + Goodwill
Cr Revaluation
Dr Revaluation
Cr capital a/c P1 and P2

Question 17

What is the journal entry for introducing a new partner?

Answer 17

Dr Bank

Cr Capital

Question 18

What is the journal entry to remove goodwill?

Answer 18

Dr capital a/c P1 and P3

Cr Goodwill

Question 19

What account do we use to dissolute a partnership?

Answer 19

Realisation account

Question 20

Journal entry for realisation account?

Answer 20

Dr realisation a/c (not bank)

Cr Asset

Question 21

Journal entry for when assets are sold during dissolution?

Answer 21

Dr Bank (cash from sale)
  Cr Realisation a/c

Question 22

Journal entry for any expenses during dissolution?

Answer 22

Dr Realisation a/c

Cr Bank

Question 23

What happens to any assets not sold during dissolution?

Answer 23

Taken by the partners

Question 24

Journal entry for assets not sold during dissolution?

Answer 24

Dr capital a/c P1 and P2

Cr realisation a/c

Question 25

Journal entry for paying creditors during dissolution?

Answer 25

``` Dr trade payables Cr bank (paid) Cr realisation a/c (discount received)(credit balance on realisation a/c = profit) ``` Dr realisation Cr capital a/c on PSR

Question 26

Final journal for dissolution of partnership?

Answer 26

Dr capital a/c | Cr bank

Question 27

What are the steps in dissolution?

Answer 27

``` Realisation account Sell assets Expenses Assets not sold taken Pay creditors Final journal ```

Question 28

Incorporation of a partnership is?

Answer 28

Setting up as a separate legal entity (limited company)

Question 29

Share capital is?

Answer 29

Capital + current

Question 30

What account is used for incorporation of a partnership?

Answer 30

Vendor account

Question 31

What are the journal entries for removing every account relating to partners for incorporation?

Answer 31

Dr capital a/c P1, P2, P3 Dr current a/c P1, P2, P3 Cr vendor a/c

Question 32

Journal entry for paying cash and shares in incorporation?

Answer 32

Dr vendor a/c (net assets transfer) Cr bank Cr ordinary share capital

Question 33

If vendor a/c has a debit balance in an incorporation this means?

Answer 33

There is purchased goodwill Dr goodwill Cr vendor a/c

Question 34

Goodwill is a what?

Answer 34

Net current asset