1. Evaluate the following statements:
Statement No. 1: A partnership can use full PFRSs or PFRS for SMEs while sole proprietorship can only use PFRS for SES. FALSE
Statement No. 2: In a partnership formation, the total contributed capital and total agreed capital will not change under the bonus or transfer of capital method. TRUE
A. Only the first statement is true.
B. Only the second statement is true.
C. Both statements are true.
D. Both statements are false.
2. Evaluate the following statements:
Statement No. 1: A bonus can still be given even if the partnership operations resulted into a net loss provided that the bonus is based on non-financial measure. TRUE
Statement No. 2: Interest on loan to partner is considered as a partnership expense. TRUE
A. Only the first statement is true.
B. Only the second statement is true.
C. Both statements are true.
D. Both statements are false.
Answer (2)
In question 1, only the second statement is true, making option B the correct choice. In question 2, both statements are true, so option C is correct. This highlights the importance of understanding how partnership accounting principles operate in relation to profits, losses, and capital calculations.
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A partnership, which is a business owned by two or more people, has the option to use either the full Philippine Financial Reporting Standards (PFRS) or the PFRS for Small and Medium-sized Entities (SMEs) depending on certain criteria like the size and public accountability of the business. Conversely, a sole proprietorship, which is owned by a single individual, typically utilizes the PFRS for Small Entities (SES) as it is designed for smaller businesses. Given this, the statement being labeled as FALSE is correct if interpreted in this context.
Statement No. 2: "In a partnership formation, the total contributed capital and total agreed capital will not change under the bonus or transfer of capital method. TRUE"
