Partnerships and Company Operations

Practice flashcards on key concepts related to partnerships and company operations.

Partnership

A business relationship between two or more persons conducting business to make a profit.

Unlimited Liability

Each partner is personally liable for the debts and obligations of the business.

Agency Relationship

Each partner acts as an agent of the firm and has the authority to bind the partnership to contracts.

Non-Taxable Entity

Partnerships are not taxed; partners pay tax on their individual shares of profits.

Fixed Capital Method

A method where separate capital and current accounts are used to record transactions in a partnership.

Fluctuating Capital Method

A method where all transactions are recorded in a single capital account in a partnership.

Profit and Loss Appropriation Account

Allocates profits among partners based on the partnership agreement.

Garner v. Murray Rule

Applies when a partner is insolvent and remaining partners must cover the loss based on their capital balances.

Solvency Test

A test that must be met before distributing dividends, checking liquidity and balance sheet conditions.

Ordinary Shares

Shares that carry voting rights and entitle shareholders to dividends.

Preference Shares

Shares that provide fixed dividends and priority over ordinary shareholders in liquidation.

Companies Act 1993

Governs company operations and financial reporting standards in New Zealand.

Balance Sheet Test

A condition indicating whether a company's assets are greater than its liabilities.

Forfeiture of Shares

Occurs when shares are forfeited due to non-payment, with amounts paid transferred into a forfeiture account.

Retirement of a Partner

Involves transfer of the retiring partner's capital and payment to the retiring partner.

Dissolution of Partnership

A process that involves closing drawings and transferring assets and liabilities to the realization account.

Jointly Owned Assets

Assets contributed by partners that are owned collectively by the partnership.