Important Rules on Partners Capital Contributions 

 The partners should agree not only on the valuation of the net asset
but of their capital share
 Capital Share of each partner is the percentage of equity that each
of them will have in the net assets of the newly formed partnership
 Capital share normally the proportionate to his capital contribution.
 In recognition of intangible factor, (partner special expertise,
established clientele or business connections) partners may agree to a
division of capital that is not proportional to their capital contribution
 Bonus on initial investment will be recognized
o bonus to new partner
o bonus to old partners
Example:

1. Full investment Approach

                  A and B contributed 100,000 and 300,000
                   Entry:              Debit Cash                        400,000
                                                Credit        A, Capital                           100,000
                                                Credit        B, Capital                            300,000
2. Bonus Approach
                    Agreed on an interest in partnership of 40:60, giving bonus to A as he is an
expert
                   Entry:  (1)       Debit Cash                        400,000
                                                Credit        A, Capital                           100,000
                                                Credit        B, Capital                            300,000
                  Entry (2)         Debit B, Capital                   60,000
                                                Credit            A, Capital                           60,000         
OR
                    Entry:              Debit Cash                        400,000
                                                Credit        A, Capital (40%)                          160,000
                                                Credit        B, Capital (60%)                           240,000