Partnership Accounts in Balance Sheet

Steps:

• Capital accounts record partners' initial and additional investments, while current accounts track ongoing profits, losses, drawings, and interest.
• Statement 1 is incorrect: Retained earnings apply to corporations; partnerships use appropriation accounts for profit distribution.
• Statement 2 is incorrect: Capital accounts show invested amounts, not total owed; current accounts reflect net balances due to/from partners.
• Statement 3 is correct: Total partners' equity (capital + current) equals net assets in the balance sheet equation.

Why D is correct:

• In partnership accounting, net assets = total capital contributions + undistributed profits/losses, per the balance sheet identity where liabilities + capital = assets.

Why the others are wrong:

• A: Includes false statements 1 and 2.
• B: Includes false statement 1.
• C: Statement 2 misrepresents capital accounts' purpose.

Final answer: D