Which of the following statements is correct? Seleccione una: a. Neither salaries to partners nor interest on partners' capital are expenses of the partnership. b. Interest on partners' capital is an expense of the partnership but not salaries to partners. c Salaries to partners are expenses of the partnership but not interest on partners' capital d. Salaries to partners and interest on partners' capital are expenses of the partnership.

Question

Anu Bhardwaj · Accepted Answer

The correct answer is:

a. Neither salaries to partners nor interest on partners' capital are expenses of the partnership.

Explanation:

In partnership accounting, salaries and interest allocated to partners are not considered expenses of the partnership. Instead:

They are treated as distributions of net income.
These allocations are made before the remaining profits or losses are divided according to the partnership agreement.
They serve as a way to equitably distribute profits among partners based on their efforts and capital contribution.

Why the Other Options Are Incorrect:

b. Interest on partners’ capital is an expense but not salaries → Incorrect: Neither is an expense.
c. Salaries are expenses but not interest → Incorrect: Same logic; both are not expenses.
d. Both are expenses → Incorrect: Misrepresents partnership accounting principles.

Accounting

Accounting

Anu Bhardwaj

Answer

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