A Good Reason Why Partners Should Spell Out the Details

question 213

Multiple Choice

A good reason why partners should spell out the details of their partnership arrangements in writing is

• A) the partnership is not a legally recognized business unless they do so.
• B) a written agreement will help reduce misunderstandings and disagreements among the partners.
• C) putting the agreement in writing will limit the liability of each partner to a specified level.
• D) doing so will make it easier to convert the business to a corporation at a later date.

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Definitions:

Annual Depreciation

Definition: The portion of the cost of a fixed asset that is expensed on an annual basis through the process of depreciation.

Book Value

The net value of a company's assets minus its liabilities, often used to assess the financial health of a business.

Double-Declining-Balance Method

An accelerated method of depreciation that doubles the normal depreciation rate.

Journal Entry

A record of a transaction in the accounting journal that may affect one or more accounts.