When Continuing Partners Agree to Relieve the Withdrawing Partners of Liability

question 45

Multiple Choice

When continuing partners agree to relieve the withdrawing partners of liability on the debts of the old partnership,the act of novation can take place which involves:

• A)an agreement by the creditor with both the withdrawing partners and the continuing partners.
• B)an agreement by the creditor with the withdrawing partners themselves and not their representatives.
• C)an agreement by the creditor only with the continuing partners.
• D)an agreement by the creditor with the new partners replacing the withdrawing partners to hold them liable for the debts.

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Definitions:

Accrual Accounting

An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.

Operating Cash Flows

Cash generated from a company's regular business operations.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that is used internationally.

Direct Method

An accounting method used in cash flow statements that lists major categories of gross cash receipts and payments, providing a clearer picture of a company's cash flow from operating activities.