Accounting For Partnerships

Question 1

What is a partnership?

Answer 1

A partnership is a form of organization where two to twenty persons are associated to operate a business entity with a view to earn profit.

Question 2

What is a sole trader?

Answer 2

a simple business structure in which one individual runs and owns the entire business

Question 3

What is a corporative?

Answer 3

a business or organisation that’s owned and controlled by its members, to meet their shared needs.

Question 4

List some types of partners

Answer 4

1. active partner
2. sleeping/dormant partner
3. nominal partner
4. minor partner
5. secret partner
6. limited partner
7. outgoing partner

and so on……

Question 5

List features of a partnership.

Answer 5

1. voluntary association
2. unlimited liability
3. Mutual Agency

Question 6

What is mutual agency?

Answer 6

the right of all partners to represent the business and bind the partnership to contracts and agreements.

Question 7

What does limited liability mean in partnership?

Answer 7

business owners who are legally liable for any debt their business might accrue

Question 8

Give reasons for forming a partnership.

Answer 8

1. increased capital

2. diverse skills.

Question 9

List the essential components of a partnership agreement.

Answer 9

1. share of profits
2. interest on capital and drawings
3. salaries

and more…….