Question

Fill in the blanks:
(i) Partnership originates with \(\underline{\hspace{2cm}}\).
(ii) In fixed capital method, the capital accounts always show \(\underline{\hspace{2cm}}\) balance.
(iii) Premium brought by new partner is distributed to old partners in \(\underline{\hspace{2cm}}\) ratio.
(iv) \(\underline{\hspace{2cm}}\) type of goodwill fetches highest value.
(v) The annual reports of a company are issued to its \(\underline{\hspace{2cm}}\).
(vi) Common size analysis is also known as \(\underline{\hspace{2cm}}\) analysis.
(vii) Sale of property is \(\underline{\hspace{2cm}}\) type of activity.

Hint:

Remember: sacrificing ratio is always used when new partners bring goodwill; fixed capital never changes.

Answer 1

Partnership begins with an agreement because a partnership is created only when two or more persons decide to run a business together with a clear understanding. Under the fixed capital method, capital accounts always maintain a fixed balance, with adjustments made through current accounts. When a new partner brings premium, it compensates old partners for their sacrifice, so it is shared in the sacrificing ratio. Purchased goodwill carries the highest value because it is acquired for consideration. Annual reports are issued to shareholders as they are stakeholders. Common size statements use vertical analysis. Sale of property is an investing activity.