METHODS OF PARTNERSHIP LIQUIDATION

1. LUMP-SUM
2. INSTALLMENT
-is the method where realization of non-cash assets is accomplished over an extended period of time. When cash
is available, creditors may be partially or fully paid.
-Any excess may be distributed to the partners in accordance with a program of safe payments or cash priority
program. This persists until all non-cash assets are sold.

STEPS IN INSTALLMENT LIQUIDATION

1. Realization of n0n-cash assets.
2. Payment of liquidation expenses and adjustment for unrecorded liabilities. (Distributed according to P/L ratio)
3. Payment of liabilities to outsiders
4. Distribution of available cash based on a schedule of safe payments or cash priority program.

SCHEDULE OF SAFE PAYMENTS

- is a reliable method of computing the amount of safe payments to partners for it prevents excessive payments
to any partner.

CASH PRIORITY PROGRAM

- is a procedure which is prepared at the start of the liquidation process that help the partners project the expected
cash distribution.

ENTRIES RELATED TO LIQUIDATION

SALE OF NON-CASH ASSETS DISTRIBUTION OF GAIN OR LOSS ON
a. At book value REALIZATION
Cash xx  Gain on realization xx
Non-cash assets xx A, capital xx
b. Above book value B, capital xx
Cash xx C, capital xx
Non-cash assets xx
Gain on realization xx  A, capital xx
c. Below book value B, capital xx
Cash xx C, capital xx
Loss on realization xx Loss on realization xx
Non-cash assets xx
PAYMENT OF LIABILITIES EXERCISE OF RIGHT OF OFFSET
 Liabilities xx  A, loan xx
Cash xx A, capital xx

ADDITIONAL INVESTMENT BY PARTNER DISTRIBUTION OF CASH

 Cash xx  A, capital xx
A, capital xx B, capital xx
C, capital xx
DEFICIENCY ABORBED BY SOLVENT PARTNER Cash xx
 A, capital xx
B, capital xx