Asked by Ahmed Aldughaither on May 11, 2024
Verified
Which of the following statements is correct?
A) Salaries to partners and interest on partners' capital are expenses of the partnership.
B) Salaries to partners are expenses of the partnership but not interest on partners' capital.
C) Interest on partners' capital is an expense of the partnership but not salaries to partners.
D) Neither salaries to partners nor interest on partners' capital are expenses of the partnership.
Salaries
Employee pay based on a specified amount rather than an hourly rate.
Interest
The cost of borrowing money or the return on invested funds, typically expressed as a percentage rate over a period of time.
- Distinguish between expenses and distributions in a partnership.
Verified Answer
TB
Talasila Bharat ChowdaryMay 16, 2024
Final Answer :
D
Explanation :
Salaries to partners and interest on partners' capital are not considered expenses of the partnership in the traditional sense. Instead, they are appropriations of profit. This means they are ways of distributing the profit among the partners rather than being expenses incurred in the operation of the business.
Learning Objectives
- Distinguish between expenses and distributions in a partnership.