PARTNERSHIP FORMATION  NO SPECIFIC UNDERTAKING REQUIRED
 Person related by affinity may enter such partnership
(EXAM)
1. An advantage of the partnership as a form of business organization would be: A PARTNERSHIP IS
CREATED BY MERE AGREEMENT OF THE PARTNERS
2. Failure to comply with the requirements of execution in a public instrument for a contract of partnership
having a capital of P3,000 or more MAKES THE CONTRACT STILL VALID
3. Unlimited liability means THE OWNER IS RESPONSIBLE FOR ALL BUSINESS DEBTS.
4. The amount of loan advanced by a partner to partnership is transferred to? PARTNERS’ LOAN
CAPITAL
5. What type of agreement is used to form a partnership business? WRITTEN OR ORAL AGREEMENT
6. Which kind of partnership one partner has unlimited liability and other partner have limited liability?
LIMITED PARTNERSHIP
7. Which of the following is a characteristic of most partnerships? MUTUAL CONTRIBUTION
8. You and I formed a partnership. You contributed P100 cash, while I contributed a stapler which I bought
10 years ago for P1,000. If we sell the stapler currently, we would probably sell it for only P2. My
capital account should be credited for P1,000. FALSE
9. On December 1, Pedro and Juan formed a partnership, agreeing to share profits and losses in the ratio of
2:3 respectively. Pedro contributed a parcel of land that cost P125,000. Juan contributed P150,000 cash.
The land was sold for P150,000 on December 1, five hours after formation of the partnership. How much
should be recorded in Pedro's capital account on formation of the partnership? P150,000
10. The following describes a partnership, except:
 IT IS CREATED BY CONTRACT AND LAW.
 It has legal or juridical personality.
 It is created for the purpose of profit.
 It may appear in any form, except in cases where real property s contributed in which case a
public instrument is required.
11. In a partnership, partners liabilities are UNLIMITED.
12. The following instances do not necessarily establish a partnership, except:
 A joint purchase of land by two
 An agreement to share the profit and losses on the sale of land
 A common ownership of property
 A CONTRIBUTION OF MONEY OR INDUSTRY TO A COMMON FUND FOR THE
PURPOSE OF DOING BUSINESS TO GAIN PROFIT.
13. A particular partnership has the following characteristics, except
 Exercise of a profession or vocation
 Object must be determinate
14. The following are essential requisites of a contract of partnership, except:
 The partnership must be organized for gain or profit
 There must be a valid
 THERE MUST BE A CONTRIBUTION OF MONEY ONLY TO THE COMMON FUND
 The partnership should have a lawful object or purpose, established for the common benefit or
interest of the partners
15. If real properties or real rights in real properties are contributed without regard of the value, A
DOCUMENT PREPARED BY THE NOTARY PUBLIC IN THE PRESENCE OF THE PARTIES IS
NEEDED
16. Which types of partnership have no agreement in terms of the duration of partnership?
PARTNERSHIP-AT-WILL
17. Which of the following statements is not true about the partnership form of business? IN THE
ABSENCE OF AGREEMENT, PARTNERS WILL BE PAID SALARIES
18. Which one of the following is NOT an essential feature of a partnership?
 There must be an agreement
 There must be a business
 The business must be carried on for profit
 THE BUSINESS MUST BE CARRIED ON BY ALL THE PARTNERS
19. Which of the following would least likely be stated in the articles of partnership? WHAT PRODUCTS
THE COMPANY WILL SELL
20. If there is no agreement as to the share in the losses and profits, then each partner shall have a share in
the same proportion to what he may have contributed, but the following are exceptions to this statement
other than one
 The industrial partner, under the circumstances shall be qualified to share in the profits as may be
just and equitable.
 THE INDUSTRIAL PARTNER SHALL BE ENTITLED TO A SHARE IN THE LOSSES AS
MAY BE JUST EQUITABLE WITH REGARDS TO OTHER PARTNERS.
 The industrial partner shall also receive a share in the profits in proportion to his capital if he
contributed such aside from his services.
 The industrial partner shall not be liable for the losses.
21. The assets contributed to (and related liabilities assumed by) the partnership are measured in the
partnership books at carrying amount or cost to the contributing partner. FALSE

22. Compute for: (1) Pedro's adjusted capital before the admission of Juan; and (2) the amount of cash
investment by Juan: (1) P204,794; (2) 102, 397
23. How much cash must Pedro invest to bring the partners' capital balances proportionate to their profit and
loss ratio? P277,500
24. Answer the following questions:
 The net adjustment – capital in the books of: PEDRO-P70,000 NET CREDIT; JUAN-70,000
NET DEBIT
 The adjusted capital of Pedro and Juan in the respective books: PEDRO-P790,000; JUAN-
P930,000
 The additional investment (withdrawal) made by Pedro: (P170,000)
 The total assets of the partnership after formation: P2,120,000
 The total capital of the partnership after formation: P1,550,000
PARTNERSHIP OPERATION
(EXAM)
1. LISA and ANA are partners who shares profits and losses in the ratio of 60:40, respectively. Lisa's
salary is P60,000 and P30,000 for Ana. The partners are also paid interest on their average capital
balances. In 2019, Lisa received P30,000 of interest and Ana, P12,000. The profit and loss allocation is
determined after deductions for the salary and interest payments. If Ana share in the residual profit
(profit after deducting salaries and interest) was P60,000 in 2019, what was the total partnership profit?
P282,000
2. In the absence of stipulation, the share of each partner in profits or losses shall be in the same proportion
to what he may have contributed, but the industrial partner may be liable for the losses. FALSE
3. X and Y share profits after the provision of annual salary allowances of P14,400 and P13,200,
respectively in the ratio of 7:3. However, if partnership's net income is insufficient to provide for said
allowances in full amount, the net income shall be divided equally between the partners. In 2019, the
following errors were discovered: Depreciation for 2019 is overstated by P3,500, and the inventory on
December 31, 2019 is understated by P6,400. The partnership net income for 2019 was reported to be
P18,000. The capital accounts of the partners should be increased (decreased) by: (CAPITAL
ADJUSTMENTS) X- P5,610; Y- 4,290
4. Partner X and Partner Y have the following profit and loss agreement: salaries of P250,000 and
P280,000 for X and Y, respectively; a bonus to Partner X of 10% of profit after salaries and bonus; and
interest of 10% on average capital balances of P200,000 and P350,000 for Partner X and Y, respectively.
One third of any remaining profit is allocated to Partner X and the balance to Partner Y. If the
partnership had profit of P1,002,500, how much should be allocated to Partner Y? P564, 697
5. The partners share in partnership profits or losses in accordance with their partnership agreement. If
there is no stipulation on how the partners should share in the profits or losses of the partnership,
THEIR RESPECTIVE SHARES WOULD BE IN PROPORTION TO THEIR CONTRIBUTIONS.
6. On January 1, 2019, B1 and B2 formed a partnership. B1 contributed cash while B2, previously a sole
proprietor, contributed property other than cash, including realty subject to a mortgage, which the
partnership assumed. B2's capital account at January 1, 2019 should be recorded at: THE FAIR VALUE
OF THE PROPERTY LESS THAN THE MORTGAGE PAYABLE AT JANUARY 1, 2019.
7. If the partnership agreement provides a formula for the computation of a bonus to the partners, the bonus
would be computed IN ANY MANNER AGREED TO BY THE PARTNERS
8. The X and Y partnership agreement provides special compensation to the managing partner, X; Partner
X receives a bonus of 20% of profit before salary and bonus; and also receives a salary of P55,000. Any
remaining profit or loss is to be allocated equally. During 2019, the partnership had profit of P100,000
before the bonus and salary allowances. As a result of these distributions, Y's equity in the partnership
would DECREASE
9. Which one of the following items cannot be recorded in the profit and loss appropriation account?
RENT PAID TO PARTNERS
10. A and her very close associate B formed a partnership on Jan. 1, 2019 with A contributing P120,000
cash while B contributing equipment with a book value of P60,400 and a fair value of P48,800 and
inventory items with a book value of P22,400 and a fair value of P23,200. During 2019, B made
additional investments of P11,500 on May 1 and P10,600 on July 1, and on Nov. 1, he withdrew
P35,000. Partner A had no additional investments or withdrawals during the year. The average capital
balance at the end of 2019 for B is P79,134.
23. A, B and C are partners in an accounting firm. Their ending capital account balances were: A, P180,000;
B, P200,000 and C, P150,000. They share profits and losses in a 3:4:2 ratio, after the following special
terms:
 Partner C is to receive a bonus of 15% of the profit after bonus and interest.
 Interest of 10% shall be paid on that portion of the partner's capital in excess of P100,000.
 Salaries of P50,000 and P65,000 shall be paid to partners A and C, respectively.

11. The partners share in the profits and losses of a partnership in accordance with their partnership Assuming profits of P155,000 in 2019, the total profit share of Partner C would be: P87,169
agreement. If only the share of each partner in the profits has been agreed upon, the share of each in the
losses shall be in the same proportion. TRUE

12. Which of the following is NOT considered a legitimate expense of a partnership? INTEREST PAID TO
PARTNERS BASED ON THE AMOUNT OF INVESTED CAPITAL

13. A partner's drawing account is, in substance, A CONTRA- CAPITAL ACCOUNT

14. A partner who contributes cash or other non-cash assets to the partnership, rather than services, is called
an industrial partner. FALSE

15. The most equitable distribution of partnership profit based on capital contributions uses which of the
following capital concept? AVERAGE CAPITAL
24. What amount of interest should be credited to ANA’s capital account for 2019? P46,125
16. Closing entries of a partnership include entries to CLOSE INCOME AND EXPENSE ACCOUNTS TO
THE INCOME SUMMARY ACCOUNT; AND THEN CLOSE THE PROFITS OR LOSSES TO
THE DRAWING ACCOUNT

17. A statement of changes in partners' equity should include all of the following except
 Beginning capital balances.
 Investments during the period.
 PARTNER’S PAYMENTS OF LOAN.
 Withdrawals during the period.

18. If AB partnership has profit of P44,000 and Partner A is to be allocated a bonus of 10% of profit after
the bonus, A's bonus would be P4,000

19. If any loan or advance is provided by partner then, balance of such Loan Account should be transferred
IN PARTNERSHIPS’ BALANCE SHEET, LIABILITY SIDE

20. The division of partnership profits on the basis of salaries, interest and an agreed ratio is usually 25. Which of the following correctly states B's profit share for the year? P208,000
necessary because PARTNERS SELDOM CONTRIBUTE TIME, EFFORT AND RESOURCES
EQUALLY

21. Salary and interest allowances are reported in the statement of comprehensive income as salaries and
interest expenses. FALSE

22. LISA is trying to decide whether to accept a salary of P400,000 or a salary of P250,000 plus a bonus of
5% of net income after salary and bonus as a means of allocating profit among the partners. Salaries
traceable to the other partners are estimated to be P200,000. What amount of income would be necessary
so that LISA would consider the choices to be equal? P3,600,000