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(Advanced Accounting Part 1)

LECTURE AID
2016
ZEUS VERNON B. MILLAN
AA PART 1: Zeus Vernon B. Millan

PARTNERSHIP
Overview on the topic:
Chapter
Title
1

Sub-topics___

Partnership - Part 1

Partnership Formation

2 Partnership Part 2

Partnership Operations

3 PartnershipPart 3

Partnership Dissolution

4 PartnershipPart 4

Partnership Liquidation

AA PART 1: Zeus Vernon B. Millan

Chapter 1 Partnership (Part 1)


Learning Objectives

Differentiate between the accounting


for partnerships, sole proprietorships,
and corporations.
State the valuation of contributions of
partners.
Account for the initial investments of
the partners to the partnership.
State the peculiar accounts used in a
partnership and identify the
transactions that affect these accounts.

AA PART 1: Zeus Vernon B. Millan

Partnership

A partnership is an unincorporated association of two or


more individuals to carry on, as co-owners, a business,
with the intention of dividing the profits among
themselves.

AA PART 1: Zeus Vernon B. Millan

Characteristics of a partnership

1. Ease of formation
2. Separate legal personality
3. Mutual agency
4. Co-ownership of property
5. Co-ownership of profits
6. Limited life
7. Transfer of ownership
8. Unlimited liability (this is applicable to a general
partnership)

AA PART 1: Zeus Vernon B. Millan

Accounting for partnerships

The following are the major considerations in the


accounting for the equity of a partnership:
1. Formation accounting for initial investments to the
partnership
2. Operation division of profits or losses
3. Dissolution admission of a new partner and withdrawal,
retirement or death of a partner
4. Liquidation winding-up of affairs

AA PART 1: Zeus Vernon B. Millan

Valuation of contributions of partners

All assets contributed to (and related liabilities


assumed by) the partnership shall be measured
at fair value.

AA PART 1: Zeus Vernon B. Millan

Partners ledger accounts

1.
2.
3.

Capital accounts
Drawing accounts
Receivable from/ Payable to a partner

AA PART 1: Zeus Vernon B. Millan

Bonus on initial investments

A bonus exists when the capital account of a partner is


credited for an amount greater than or less than the fair
value of his contributions.

The bonus is treated as adjustment to the capital


accounts of the other partners.

AA PART 1: Zeus Vernon B. Millan

OPTIONAL APPLICATIONS: (PROBLEM 1-2)

SEAT WORK:
(PROBLEM 1-5: CLASSROOM ACTIVITY)

AA PART 1: Zeus Vernon B. Millan

OPEN FORUM
QUESTIONS????
REACTIONS!!!!!

IFA PART 1A: Zeus Vernon B. Millan

AA PART 1: Zeus Vernon B. Millan

END
CLASSROOM ACTIVITIES: PROBLEM 9-7: #s 1 & 2

AA PART 1: Zeus Vernon B. Millan