New Partner can bring Capital in cash or kind. (true or false )
Answers
Answer:
This statement is true.
Explanation:
As per the provision of partnership deed, when any person is admitted to the firm, he has to bring some amount as capital which can be in cash or in kind of assets to get rights in the assets and definition share in the future profit of the firm.
Answer:
The partnership agreement may specify that the partners should be compensated for the services they provide to partnership and for the capital invested by partners.
For example, one partner contributed more of assets, and works full-time in partnership, while the other partner contributed the smaller amount of assets and does not provide as much services to partnership.
Compensation for the services is provided in the form of salary allowance. Compensation for the capital is provided in form of interest allowance. Amount of compensation is added to capital account of the partner.
To illustrate, assume that the partner received $500 as an interest allowance. The amount is also included in the net income/loss distribution entry when the books are closed to capital accounts at year end.
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