Farrell and Jimmy enter into a partnership agreement on May 1,2018.Farrell contributes $50,000 and Jimmy contributes $150,000 as their capital contributions.They decide to share profits and losses in the ratio of their respective capital account balances.The net loss for the year ended December 31,2018 is $40,000.The capital account of Farrell should be ________ with his share of the loss.
A) debited
B) credited
C) increased
D) halved

Question

Quizplus · Accepted Answer

When there is a net loss in the partnership, the capital accounts of the partners are debited with their respective shares of the loss. Therefore, Farrell's capital account should be debited with his share of the net loss, which is $10,000 ($50,000 / $200,000 * $40,000).

Farrell and Jimmy Enter into a Partnership Agreement on May