Which of the Following Statements Relating to Financial Reports for a Partnership

question 60

Multiple Choice

Which of the following statements relating to financial reports for a partnership is incorrect?

• A) Partners' salaries are normally treated as an allocation of profit.
• B) Each individual partner's equity in the business is reported separately.
• C) Interest on capital contributions is treated as an allocation of profits.
• D) Income tax expense is deducted from the partnership profit at the end of the income statement.

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Definitions:

Generally Accepted Accounting Principles (GAAP)

Generally accepted guidelines for the preparation of financial statements.

Equity

The value of an ownership interest in a company, calculated as the difference between assets and liabilities.

Assets

Resources owned by a business that have economic value and can be used to meet debts, commitments, or generate income.

Revenue

The total income generated by the sale of goods or services related to a company's primary operations before any costs or expenses are deducted.