Professional Documents
Culture Documents
Types of Partnership
- Activity
Trading Partnership
ACCOUNTING FOR SPECIAL TRANSACTIONS
Types of Partners
- As to contribution
Capitalist Accounting for initial investment
Industrial Net investment method – partner’s capital is credited
Capitalist Industrial for the amount of the net asset
Bonus method – partner’s capital is credited based on
- As to Management the agreed ratio which may be different from the
Managing Partner contribution ratio
Silent Partner
Other Classifications
Liquidating Partner
Nominal Partner – exist only for the third person
Ostensible Partner – active and known
Secret Partner – active but not known
Dormant Partner – not active and not known
Articles of Co-Partnership
- A written agreement which governs the formation,
operation, and dissolution of the partnership.
Operation
Special problems:
Closing entries (same with the other forms of org.)
Distribution of P/L
Preparation of Worksheet
Preparation of FS (BS, IS, SCE, SCF, Notes)
1-16
290k
1-18
Net income= 221,250
Ed = 81,500; Glen=69k; =70750
1-19 = ?
1-20
Net income = 45k
C = 22,680
2,. Net income =234,222.22
Problem 22:
Net income = 91,00
Pearson = 47,400
Xpecter = 43,600
ACCOUNTING FOR SPECIAL TRANSACTIONS
worst-case scenarios:
- All remaining non-cash assets are assumed to be
worthless (hypothetical loss).
ACCOUNTING FOR SPECIAL TRANSACTIONS
Corporate Liquidation
Reasons:
1. bankruptcy
2. court decree
Common Practices:
- No revenue is recognized by the consignor until the
goods are sold by the consignee to outside or third
parties.
- Upon shipment of merchandise, a special inventory
account is established on the consignor’s books.
- Consignment expenses paid by the consignor are added
to inventory cost:
o Freight
o Insurance of goods shipped
o Handling and cartage fee (delivering a land)
- When consignee paid the above on behalf of the
consignor, reimbursement is deducted from the cash
remittance.
- Reimbursable expenses paid by consignee are
considered as selling expenses: Notes:
o Advertising costs Amount assigned to unsold units in the hand of the
o Delivery and installation consignee represents the original cost of the inventory +
inventoriable cost
- When sale is made, the consignor recognized the
revenue only upon notification of sale accompanied by The amount of cost and expenses assigned to sold units
the remittance of the cash due supported by an account represents the cogs, inventoriable cost, expenses
sale. incurred in the return of goods to consignor.
- Commission on units sold is also treated as deduction Freight paid by the consignee representing delivery
from sales revenue in determining the net income from charges for goods delivered to customers is treated as
the shipment. selling costs (period costs)
ACCOUNTING FOR SPECIAL TRANSACTIONS