PARTNERSHIP ACCOUNTING

 Contract whereby two or more persons bind themselves to contribute money, property, or
industry to a common fund with the intention of dividing profits among themselves. Two or
more person may also form a partnership for the exercise of a profession.
CHARACTERISTIC OF A PARTNERSHIP
 Mutual Contribution – there cannot be a partnership without contribution of money, property,
or industry to a common fund. (Both must have contribution)
 Division of Profit and Losses – essence of partnership is that each partner must share in the
profits or losses of the venture.
 Co-ownership of contributed assets - All assets contributed into the partnership are owned by
the partnership by virtue of its separate and distinct juridical personality.
 Mutual Agency - Any partner can bind the other partner to a contract if he is acting within his
express or implied authority.
 Limited Life - A partnership has a limited life. It may be dissolved by admission, death,
insolvency, incapacity, withdrawal of a partner or expiration of the term specified in the
partnership agreement.
 Unlimited liability - All partners (except limited partners), including industrial partners, are
personally liable for all debts incurred by the partnership. If the partnership can not settle its
obligations, creditors’ claims will be satisfied from the personal assets of the partners without
prejudice to the rights of the separate creditors of the partners.
 Income Taxes. General Professional - Partnerships are exempt from taxes. The partners in the
individual capacity is taxed based on income derived from the profits of the partnership based
on the graduated tax rate.
 Partners’ Equity Accounts - Accounting for partnerships are much like accounting for sole
proprietorships. The difference lies in the number of partners’ equity accounts. Each partner
has a capital account and a withdrawal account that serves similar functions as the related
accounts for sole proprietorships.

A partnership offers certain advanatges over a sole proprietorship and a corporation. It

also has a number of disadvantages. They are as follows.
ADVANTAGES AND
 Advantages versus Proprietorship
a) Brings greater financial capability to the business. (Mas marami kayo, mas maraming
makukuhang may kakayahan, mas maraming mag contribute, it will brings financial
capability)
b) Combines special skills, expertise and experience of the partners. ( Meron kayong
partner namay special na kakayahan, may long experience ang partner mo)
c) Offers relative freedom and flexibility of action in decision-making. ( sa sole
proprietorship ikaw lang ang nag desisyon, sa partnership napapaigi yong
pagdedesisyon)
 Advantages versus Corporations
a) Easier and less expensive to organize. (compare sa corporation mas mura sa
corporation may limit pagdating sa puhunan damo registration sa corporation )
 b) More personal and informal. (mas kilala mo ang ka-partner mo compare sa
corporation nd necesarilly nga makilala mogd ang mga stockholders.)
DISADVANTAGES OF PARTNERSHIP
 Easily dissolved and unstable compared to a corporation. ( dahil madali ma dissolve umalis
ang isang partner pwede ma dissolve or kung napatay ang partner, while corporation pwede mo i-
renew pag umabot ng 50 years.)
 Mutual agency and unlimited liability may create personal obligations to partners.
 Less effective than a corporation in raising large amounts of capital. ( Mas mabagal na mag
race o mag likom ng capital ang isang partnership.)

PARTNERSHIP DISTINGUESHED FROM CORPORATION

PARTNERSHIP CORPORATION
MANNER OF CREATION Created by mere agreement Created by opearation of law
(mag agree lang kayo pwede
na kayo mag partnership)
NUMBER OF PERSONS Two or more persons At least five persons and not
exceeding 15
COMMENCEMENT OF JURICAL Execution of the Articles of Issuance of Certificates of
PERSONALITY Partnership Incorporation
MANAGEMENT Every partner is an agent of the Management is vested on the
partnership if the partners did Board of Directors. (
not appoint a managing
partner.( kung wala inapoint ng
managing partner so tanna
kamo agent ng partnership)
EXTENT OF LIABILITY Except for a limited partner, all Stockholders are liable only to
partners are liable to the extent the extent of their interest or
of his personal assets ( Lahat investment in the corporation. (
ng partner ay liable hanggang hanggang kung magkano lang
sa kanilang assets) ang iyong inenvest)
RIGHT OF SUCCESSION No right of succession. A corporation has the capacity
of continued existence
regardless of death,
withdrawal, insolvency or
incapacity of its directors or
stockholders. ( namatay ka
bilang isang stock holder
pwede iyon mamana ng iyong
anak ang pagiging stock
holder)
TERMS OF EXISTENCE Any period of time stipulated Not to exceed fifty (50) Years.
by the partners. ( mas maikli
ang buhay ng time)

CLASSIFICATION OF PARTNERSHIP
 1. According to object
a) Universal partnership of all present property - (Binibigay niyo ang lahat ng property
sa universal. Lahat ng property at lahat ng kikitain mo. Lahat ng ari-arian mo ay i-
cocontribute mo sa partnership.) (absolute)
b) Universal partnership of profits – (kikitain mo sa partnership. Lahat ng kikitain ng mga
property ay sa inyong dalawa. Same as conjugal. Kikitain hindi kasama yong
property.)
c) Particular Partnership – (specific and identify. You have diff. asset and you
contributed a car to a common a contribution. May co-ownership ang car.)
2. According to liability
a) General - All partners are liable to the extent of their separate properties. ( Unlimited
liability, kung sakaling nagkaroon ng problema ang negosyo kahit yong personal
property ay maaring kolektahin o kunin ng creditors. Nangyayari if the partnership is
general, nadadamay ang iyong personal asset, your separate properties.
b) Limited - Limited partners are liable only to the extent of their personal contributions.
( Kung ano lang ang gn contrbute mo amo lang na pwede lagson ka creditors, yong
personal aseets mo protektado. If the partnership is limited it should have the
acronym LTD. Their will be no limited if there’s no general
3. According to duration (Tagal)
a) Partnership with a fixed term or for a particular undertaking. ( Nilalagyan niyo ng
specific na buhay.
b) Partnership at will. One which no term is specified and is not formed for any particular
undertaking. (meron din siyang katapusan pero hindi lang alam kung kailan
matatapos.
4. According to purpose (bakit ka nabuo what’s the reason)
a) Commercial or trading partnership. One formed for the transaction of the business.
( Nagbebenta ka, your having a business.)
b) Professional or non-trading partnership. One formed for the exercise of preofession.
(Ex. Youre both atty and you decided to create a law firm.)
5. According to legality of existence. (POV ng batas)
a) De jure partnership. One which has complied with all the legal requirements for its
establishment. ( partnership nga nag comply sa need sang batas, you have lgal
requirement slike DTI, bus. permit)
b) De facto partnership. One which has failed to comply with all the legal requirements
for its establishements. ( You exist in fact but not in law, in process)

KINDS OF PARTNERSHIP
 General Partner. One who is liable to the extent of his separate property after all the assets of
the partnership are exhausted. ( personal asset pwede maibayad sa creditors)
 Limited Partner. One who is liable only to the extent of his capital contribution. He is not
allowed to contribute industry or services only. ( kung ano lang ang i-contribute mo amo lang
na ang makuha sa imo sang creditor)
 Capitalist Partner. One who contributes money or property to the common fund of the
partnership. ( Contributed money, my binigay kang asset)
  Industrial Partner. One who contributes his knowledge or personal service to the partnership.
(Binibigay mo ay ang iyong labor, ang skills mo)
 Managing Partner. One whom the partners has appointed as manager of the partnership.
( Nagpapatakbo ng negosyo)
 Liquidating Partner. One who is designated to wind up or settle the affairs of the partnership
after dissolution. ( siya ang partner na kung sakaling mag tigil ma close na, siya na ang bahala
sa process)
 Dormant Partner. Contributor or investor who is not active in managing the partnership and
may not be known to the outsiders. He shares profits and losses with other partners. ( hindi
siya kilala ng kahit sino, wala siyang ginagawa)
 Silent Partner. One who provides some of the capital for a business but who does not take an
active part in managing the business. ( Wala kang ginagawa pero kilala ka
 Secret Partner. One who takes active part in the business but is not known to be a partner by
outside parties. ( Hindi kilala pero may ginagawa.)
 Nominal Partner or Partner by Estoppel . One who is actually not a partner but who represents
himself as one. He is a well connected individual whose name lends credibility and recognition
to the firm. A nominal partner is paid a fee for this service. 
( Hindi naman talaga siya partner pero nag re-represent siya as a partner. )

ARTICLES OF PARTNERSHIP
Partnership may be constituted orally or in writing. Partnership agreements are embodied in the
Articles of Partnership. The following essential provisions may be contained in the agreement.
- The partnership name, nature, purpose and location.
- The names, citizenship and residences of the partners.
- The date of formation and the duration of the partnership.
- The capital contribution of each partner, the procedure for valuing non-cash investments,
treatment of excess contribution (as capital or as loan) and the penalties for a partner’s failure
to invest and maintain the agreed capital.
- The rights and duties of each partner.
- The accounting period to be adopted, the nature of accounting records, financial statements
and audits by independent public accountants.
- The method of sharing profit or loss, frequency of income measurement and distribution,
including any provisions for the recognition of differences in contributions.
- The drawings or salaries to be allowed to partners.
- The provision for arbitration of disputes, dissolution, and liquidation.
*A contract of partnership is void whenever immovable property or real rights are contrbuted and a
signed inventory of the said property is not made and attached to a public statement. (Kinontribute
na lupa pero hindi naka pangalan sa partnership, eh voide iyon. )

SEC REGISTRATION