Which of the following statements best describes accounting for a partnership?

A. A partnership may be a profit or a nonprofit entity.

B. A partnership may use federal income tax rules to account for transactions in their journals and ledger accounts.

C. A partnership's equity section contains both capital and retained earnings accounts.

D. A partnership may only distribute money through a dividend payment.

Question

Business

Mina Hatfield

14 July, 14:21

Which of the following statements best describes accounting for a partnership?

A. A partnership may be a profit or a nonprofit entity.

B. A partnership may use federal income tax rules to account for transactions in their journals and ledger accounts.

C. A partnership's equity section contains both capital and retained earnings accounts.

D. A partnership may only distribute money through a dividend payment.

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Answers (1)

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Giselle Garrison · Answer 1

B. A partnership may use federal income tax rules to account for transactions in their journals and ledger accounts.

Explanation:

There is a lot of difference in accounting of normal partnership firms and that of non profit organisations.

Simply a partnership firm cannot be formed as a non profit entity.

A partnership can use any federal laws in compliance and do accounting entries in accordance with them.

The partnership equity section only contains partner's capital account as there are no retained earnings section.

Partnership's do not pay dividend, and if it does it is not limited to money.