Question

Cash received from unclear transactions, like distributions from a limited partnership are:

a. posted to income even though there may be a return of principal.
b. allocated evenly between principal and income.
c. held in suspense until the principal and income allocation can be determined.
d. posted to principal even though there may be a reallocation to income.
e. None of the above

Answer 1

Cash received from unclear transactions, like distributions from a limited partnership, is posted to principal even though there may be a reallocation to income.

Step-by-step explanation:

The correct answer is d. posted to principal even though there may be a reallocation to income.

When cash is received from unclear transactions, such as distributions from a limited partnership, it is initially posted to the principal account. This is done even though there may be a reallocation of the cash to the income account once the principal and income allocation can be determined.

For example, if a limited partnership has a distribution of $1,000 and it is unclear how much should be allocated to principal and how much to income, the $1,000 will be posted to the principal account. Once the allocation can be determined, the cash may be reallocated to the income account.