Final answer:
Subsequent partner contributions should be credited at fair value. Small businesses may initially be funded by the owner's savings or loans, and angel investors can offer capital for equity in the company. Early-stage firms without profits face challenges in securing financial capital.
Step-by-step explanation:
Similar to initial partner contributions to begin a partnership, subsequent partner contributions to support ongoing operations or expansion should be credited to the contributing partner's capital account at fair value.
Many small businesses obtain their initial financial capital from the business owner's personal savings, or through borrowing money, sometimes using a home as collateral. In addition, angel investors, a group of affluent individuals, often contribute capital to early-stage small businesses, in exchange for an ownership stake.
Raising financial capital for a firm that is yet to turn a profit can be challenging. This establishing phase often involves convincing potential investors of the future profitability of a business that only has a prototype or idea, and no customers or profits yet.