Which of the Following Is Not a Feature of the Fixed

question 62

Multiple Choice

Which of the following is not a feature of the fixed capital balances method of accounting for partnership equity?

• A) Each partner has two permanent equity accounts, a capital account and a retained earnings account.
• B) Apart from the initial investment very few adjustments are made to the capital account.
• C) The partners retained earnings accounts include their proportions of the profit of loss for the period.
• D) Partner's drawings accounts are closed at the end of the accounting period to their capital accounts.

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Definitions:

Lost Profits

Refers to the potential earnings a business was unable to realize due to wrongful actions by another party.

Insolvent

A financial state where an individual or entity cannot meet their debts as they become due.

Down Payment

An initial upfront portion of the total amount due, typically in the context of purchasing expensive goods like cars or real estate, representing a fraction of the full price to reduce the loan amount.

Misrepresenting Solvency

Falsely presenting a company's or individual's financial stability or ability to pay debts, often to secure loans or delay bankruptcy.