Assignment 5:

1. Partnerships:
A partnership is a business with multiple owners, each of whom has invested in the
business. Some partnerships include individuals who work in the business, while
other partnerships may include partners who have limited participation and also
limited liability for the debts and lawsuits against the business.
2. Forms of organizations:
 Sole proprietorship.
 Partnership.
 Limited liability company.
 Limited liability partnership.
 Corporation.
 S corporation.
3. Limited partnerships:
A Limited Partnership is a partnership consisting of a general partner, who manages
the business and has unlimited personal liability for the debts and obligations of
the Limited Partnership, and a limited partner, who has limited liability but cannot
participate in management.
4. Limited liability partnerships
A limited liability partnership (LLP) is a partnership in which some or all partners
(depending on the jurisdiction) have limited liabilities. It therefore can exhibit
elements of partnerships and corporations. In an LLP, each partner is not responsible
or liable for another partner's misconduct or negligence.
5. S corporations:
S corporations are ordinary business corporations that elect to
pass corporate income, losses, deductions, and credits through to their shareholders
for federal tax purposes.
6. Limited Liability companies:
A limited liability company (LLC) is a corporate structure in the United States
whereby the owners are not personally liable for the company's debts or liabilities.
Limited liability companies are hybrid entities that combine the characteristics of a
corporation with those of a partnership or sole proprietorship.
7. Accounting for partnerships on dividing income & loss, allocation on
stated ratios, allocation on capital balances.
 partnerships on dividing income & Loss: (Page 475)
 allocation on stated ratios: (Page 476)
 allocation on capital balances: (Page 476)
8. Statement of partners equity:
The statement of partner’s capital is a financial report that shows the changes in
total partners’ capital accounts during an accounting period. In other words, it’s a
financial statement that reports the increases and decreases in the partners’
accounts over the course of a period.
9. Accounting for
 Admission of a partner:
Purchase of partnership interest:
Investing assets in a partnership:
 withdrawal of a partner:
First, withdrawing partner can sell his or her interest to another person who
pays for it.
Second, when cash or other assets of the partnership are distributed to the
withdrawing partner in settlement of his or her interest.
 liquidation of partnership with no capital deficiency:
No capital deficiency means that all partners have a zero or credit balance in
their capital accounts for final distribution of cash. ... On the liquidation date,
the current period's income or loss is transferred to the partners'
capital accounts according to the sharing agreement.
 liquidation of partnership capital deficiency.
Capital deficiency means that one or more partner has a debit balance in
his/their capital account at the point of final cash distribution. The capital
deficiency may arise from liquidation losses, excessive withdrawals
before liquidation or recurring losses in prior periods.