 It consists of 2 or more persons

 Bind themselves to contribute money, property or

service to a common fund

 Intention is to divide the profits

 How will the contributed asset be recorded in the new
partnership books?
1. AGREED value
2. In the absence of Agreed value, use FAIR /
APPRAISED VALUE.
 How will the liabilities of the existing sole proprietors be
included in the new partnership books?
1. When those liabilities are assumed by the partnership
2. If silent: NOT assumed by the partnership
Contributed Asset (Agreed/FMV/Appraised xxx
Liabilities assumed by partnership (xxx)
Contributed Capital XXX

Total Agreed Capital xxx

Capital Interest ratio agreement x xx
Capital Credit XXX
Total Agreed Capital xxx
Capital Interest ratio agreement x xx
Capital Credit XXX

CAPITAL CREDIT = Capital of each partner after formation

Always based on the AGREED Capital
If Silent: Contributed Capital = Capital Credit