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    This document discusses partnership accounting and covers several topics: 1. Theories of partnership including definitions, characteristics, and capital and drawing accounts. 2. Formation of partnerships including methods for accounting for partners' capital accounts such as the net investment, bonus, and revaluation methods. 3. Partnership operations including the distribution of profits and losses between partners. 4. Dissolution of partnerships including events that can cause dissolution like admission of a new partner, retirement of a partner, death of a partner, and incorporation of the partnership.

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    Afar

    Uploaded by

    Kris Tine
    30 views12 pages
    This document discusses partnership accounting and covers several topics: 1. Theories of partnership including definitions, characteristics, and capital and drawing accounts. 2. Formation of partnerships including methods for accounting for partners' capital accounts such as the net investment, bonus, and revaluation methods. 3. Partnership operations including the distribution of profits and losses between partners. 4. Dissolution of partnerships including events that can cause dissolution like admission of a new partner, retirement of a partner, death of a partner, and incorporation of the partnership.

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    This document discusses partnership accounting and covers several topics: 1. Theories of partnership including definitions, characteristics, and capital and drawing accounts. 2. Formation of partnerships including methods for accounting for partners' capital accounts such as the net investment, bonus, and revaluation methods. 3. Partnership operations including the distribution of profits and losses between partners. 4. Dissolution of partnerships including events that can cause dissolution like admission of a new partner, retirement of a partner, death of a partner, and incorporation of the partnership.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    30 views12 pages

    Afar

    Uploaded by

    Kris Tine
    This document discusses partnership accounting and covers several topics: 1. Theories of partnership including definitions, characteristics, and capital and drawing accounts. 2. Formation of partnerships including methods for accounting for partners' capital accounts such as the net investment, bonus, and revaluation methods. 3. Partnership operations including the distribution of profits and losses between partners. 4. Dissolution of partnerships including events that can cause dissolution like admission of a new partner, retirement of a partner, death of a partner, and incorporation of the partnership.

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    of 12

    AFAR

    ADVANCE FINANCIAL ACCOUNTING & REPORTING


    LESSON 1

    PARTNERSHIP
    ACCOUNTING
    L1.1 : THEORIES
    L1.2 : FORMATION
    L1.3 : OPERATIONS
    L1.4 : DISSOLUTION
    L1.5 : LIQUIDATION
    L1.1 - THEORIES

     Definition
    o Association of two or more persons
    o To carry on as co-owners
    o Business for profit

     Characteristics
    o Separate legal personality
    o Ease of formation
    o Co-ownership of partnership property and profits
    o Limited life
    o Mutual Agency
    o Unlimited Liability
    L1.1 - THEORIES

    CAPITAL ACCOUNT DRAWING ACCOUNT


    Dr. Cr. (Normal side) Dr. (Normal side) Cr.
    1. Permanent 1. Original 1. Partnership 1. Withdrawal of
    withdrawal of investment obligations assets by the
    capital 2. Additional assumed or paid partners in
    2. Debit balance of investment by the partner anticipation of net
    the drawing 3. Partner’s share in 2. Personal funds or income
    account at the end the profits* claims of partner 2. Partner’s personal
    of the period collected and indebtedness paid
    3. Partner’s share in retained by the or assumed by the
    the losses* partnership partnership
    3. Periodic partner’s 3. Funds or claims of
    salaries depending partnership
    on the accounting collected and
    and disbursement retained by the
    procedures partner
    L1.2 – FORMATION
    L1.2 – FORMATION

    METHODS IN ACCOUNTING FOR THE CAPITAL ACCOUNTS OF THE PARTNERS

    1. Net Investment Method


    o Total Contributed Capital = Total Agreed Capital *

    2. Bonus Method
    o Total Contributed Capital = Total Agreed Capital but partner’s contribution ≠
    agreed capital credit

    3. Revaluation Method
    o Revalued upwards – Higher TAC
    o Revalued downwards – Lower TAC

    4. Goodwill Method **
    L1.3 - OPERATIONS

     Distribution of Profit
    1. Agreement
    2. No agreement
    Industrial Partner
    - Just and equitable share
    - Equal to the share of the capitalist partner having the least share
    Capitalist Partner
    - Contribution

     Distribution of Loss
    1. Agreement
    2. No agreement but has an agreement for PROFIT DISTRIBUTION
    3. No agreement for both
    Industrial Partner
    - Not liable
    Capitalist Partner
    - Contribution
    L1.4. - DISSOLUTION

    1.ADMISSION OF A NEW PARTNER


    2.RETIREMENT OF A PARTNER
    3.DEATH OF A PARTNER
    4.INCORPORATION OF A
    PARTNERSHIP
    L1.4. - DISSOLUTION

    Purchase all or part of the


    interest through existing partners

    ADMISSION OF A
    NEW PARTNER
    Investment in partnership P xxx
    *New Partner’s proportionate book value (xxx)
    Bonus xxxin the
    Investment of all assets
    *new partner ′ s
    partnerships by incoming partner
    proportionate 𝐵𝑉 = 𝑜𝑙𝑑 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑖𝑛 𝑝𝑎𝑟𝑡𝑛𝑒𝑟𝑠ℎ𝑖𝑝
    𝑥 % 𝑜𝑓 𝑛𝑒𝑤 𝑝𝑎𝑟𝑡𝑛𝑒𝑟
    L1.4. - DISSOLUTION

    RETIREMENT OF A PARTNER

    Measurement: Adjusted capital balance


    ± share in profit or loss from the last closing date to the date of the partner’s retirement
    ± in changes in the valuation of all assets and liabilities
    3 Case Scenarios:
    1. Settlement = withdrawing partner’s interest • Partial goodwill method
    2. Settlement > withdrawing partner’s interest • Total goodwill method
    3. Settlement < withdrawing partner’s interest • Bonus method
    L1.4. - DISSOLUTION

    Death of a partner
    L1.4. - DISSOLUTION

    INCORPORATION OF
    A PARTNERSHIP

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