DEFINITION OF PARTNERSHIP Partners’ withdrawal accounts:

By contract of partnership, two or more persons bind themselves to  Permanent withdrawals are made with the intention of permanently decreasing
contribute money, property or industry to a common fund with the intention of partner’s capital accounts.
dividing the profits among themselves.  Temporary withdrawals are regular advances made by the partners in
anticipation of their share in net income
 Net income/loss may be recorded either to the drawing account or the capital
General Professional Partnership (GPP) is a partnership formed for the exercise of account
a profession, like law, accounting, engineering, architecture.
ACCOUNTING FOR PARTNERSHIP
CLASSIFICATION OF PARTNERSHIP
Loans to/ from partners
o As to liability of the partners
Loans Receivable-Partner – the account debited if a partner withdraws a substantial
 General partnership
amount of money
 Comprised of general partners or a combination of general and
industrial partners.
 Personally liable for the partnership’s debts after the
exhaustion of its assets
o Limited partnership
 Comprises both limited and general partners.
 Only the limited partner shall be liable to the extent of his contribution
to the partnership
 At least one of the partners must be a general partner.
ACCOUNTING FOR PARTNERSHIP
Partner’s capital accounts
 Credited for his initial investments and additional net investments
 Credited for the credit balance of the drawing account at the end of the
accounting period
 Debited for permanent withdrawals
 Debited for debit balance of the drawing account at the end of the period.