With the Fixed Capital Balances Method (Method 2) of Accounting

question 44

Multiple Choice

With the fixed capital balances method (method 2) of accounting for partnership equity, the general journal entry to record interest on capital is:

• A) debit profit distribution account; credit partner's capital accounts.
• B) debit profit distribution account; credit partner's retained profit accounts.
• C) debit profit or loss summary account; credit partner's capital accounts.
• D) debit profit or loss summary account; credit partner's retained earnings accounts.

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Definitions:

Corporate Income Statement

is a financial document that outlines a corporation’s revenues, expenses, and profits or losses over a specific period.

Income From Continuing Operations

The earnings generated from a company's ongoing core business operations, excluding extraordinary items.

Cumulative Effect

The aggregate impact of an accounting change or policy adjustment over the period before the adjustment is implemented, often recognized immediately in financial statements.

Income Tax Expense

The amount of money that companies or individuals owe the government based on their earnings.