Question

Which of the following is false regarding the measurement of partnership income?

	A.	Partnerships do not report income tax expense.
	B.	Interest allocated to partners is not deducted as an expense in measuring partnership income.
	C.	Partnerships must use the cash basis of accounting rather than the accrual basis.
	D.	Salaries to partners are treated as distributions of partnership income.

Answer 1

Answer:

the partnership is an agreement between two or a person to carry the business & share the profit in their agreed ratio, in the absence of written agreement they shared the profit equally. a partnership firm may follow a cash basis or accrual basis at the option of firm for the measuring income, however it is consistently applied.

In partnership do not report the income tax expenses, also  Interest allocated to partners is not deducted as an expense in measuring partnership income & Salaries to partners are treated as distributions of partnership income while measuring the income of partnership firm.

However, it is not mandatory for the partnerships to use the cash basis of accounting rather than the accrual basis in the measurement of income of the partnership firm.

Accordingly, option (C) is the correct answer.