If the Fixed Capital Balances Method (Method 2) Is Used

question 32

Multiple Choice

If the fixed capital balances method (method 2) is used to account for partnership equity, both the profit or loss and the partner's drawings are closed to the:

• A) retained earnings account.
• B) capital accounts.
• C) profit or loss summary account.
• D) profit distribution account.

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Definitions:

Equilibrium Level

Equilibrium level refers to the state in an economy or market where supply equals demand, so there is no tendency for change.

Disposable Income

Available financial assets to households for investments and outlays after income taxes have been applied.

Government Spending

Expenditures by government bodies on goods and services, including salaries, infrastructure, and welfare programs.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.