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    © All Rights Reserved
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    2 views83 pages

    Formation - Liquidation (DAYAG)

    Uploaded by

    sunthatburns00

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 83
    Chapter 17 - Partnership Formation iriredvetion wlio contiouieimioneyroperly, of ‘viding the profs cmong juigical which may eth siness and personal environments chonge, ‘ond uimataly, to incorporate, (né of the’ major cc nd other resoirce: Types of Partnerships There are two types of ‘Partnerships: (I) general partnerships and (2) limited partnerships: ‘General Parinerships ‘General Partnerships ‘are those in Partnership's creditors if partnership assets ore Patines cre refered to os general parines.C ind of partnership. {nite Parieihips reditors re ing partners can be lied, which means that thelr obligations to c Inted fo her opt Cons, Thus, ther pesonal properties cre rut ink ik pp nan SCTOMCNP EES Tease ED ‘ened Finan Antng =A Compre Coote Pde AReeeh hy cand they play no role in the prineship management which § ful responsbty of general pariner. Features of General Paineships Zi General Partnerships have the folowing unique | features 1: abe OF Familia! The patersumereyeputethet OOeEMEY INS Wing Conceing who contbutes ase oF srvi ara nctors. ond hy profs ond loses ee olocated, Tis wien document is called the Partner Ggreement. In some cases, parinrsip may ao be created BY oF6l ogreemery between two ormore | persons or maybe implied by thelr agreement. 2. Wimiled Lf The possbilly that the operations of o partnership Could hay ‘Conttve ater the withdrawl or death ofc Parfnet was considered c moj pittal of tis fom ot busines organzaton. 3. Assignment of Partner's Interest. ‘Assignment of ‘automatically dissolve a partnership. Since o partné partners is ¢ personal one,-ort assignment» of ‘automatically admit the assignee into the partnership. to partcipote'in managing the atfais of the partners limited in the allocation of profit and loss and the righ interes in he event of dsoltion. by, ate eer} interest ‘does fig) hip to the ote ‘authoriy fo act on his beholl. Parinessip creciters having cificulty in collecting from the partnership may request payment from any partner wha hes personal ‘asses in excess of personal faites. 5. Wutual Agency. Every pares an Ogént ond has the autho Yo Gt or he. ~ Ptnestp and to enter into contracts ons behaf. However, acts beyond the normal scope of business operations such os oblaining loan’ by. © pextner {generally donot bind the porinersip ules specfc Guthory has been given to the pariner. ‘ ‘Separate Legéll Personal. Portnestip law provides that portneship os 0 juridical personaly separate and dstnct rom that of each portner. 7, ‘Shating Profit and tosses; Profit and losses ore shared among the partnersin ory manner to which they agree. Underlying Equity Theories (Proprietary and Enfiy Theories) Equity theories relate to how on entity can be viewed from the accounting and leg! point of view. These theories deat with the question of who the-entily is. ParinerstiPs ‘hen had affected and inuenced by the folowing the es 1, Proprietary theory ceotolabanes sbaorgegie hemes bis of the proprietor. The profis generaied there trom are viewed 05 © arora he Roreglat copla. Chareietses of tis theory oar PP 0 ates. cansdered os dito ot came ane cto etme! United iby of gener pornos econ Soe ome m rae a fends beyond the entity to the Indlwou Se ey Control parnestin sched e Pon the adnisioncrvthdawat ot vithtowet ot opti. In practice, Proprctoshins ae tr ie han neyo ato rons SBE ees. een usr ‘most partnerships. ‘ype of theory primarily affected 2 aay Oe at fom ner camza (nd dtinct ently possessing is patinership are usualy vi 1505 rot ote ee eomed by the Racemvreshoect hay helgtnc wench rr ni the death of acmision of. pans panes agement thoes te se-colled big accounting fs usualy provide forty partnership beyond the death of a partner, ee serne 10 wien Prinership Agreements (Aces fare) sine tis perfectly acceptable to have on orl parinestip agreement, its preferable it such agreement in writing. Lapses in memory and future misunderstandings ly avoided when agreements are written. A vritien ageeement is called the partnership ond usuaty provides for the flowing: 1, Name of he partnerships, bs 1. The name, adcreses ofthe porns clases of partners, stating whether the ‘he effective date 4, The purpose/s and’principal office of the business: 5, The capital of the partnerships, stating the contribution of individual partners. ‘their description gnd agreed values; '6. The rights cand duties of each partner: 7. The manner of dividing net income o oss among the peries including slay ‘alowance andinterest on copia, 8° The Conditions under which the partners withdraw money or other assets for partnership use; 9. The mannet of keeping fhe book of accounts: 10.The causes of dissolution; and 11. The provisign for arbitration in’ ‘setting disputes. ‘Accounting and Financial Reporting Requtrements for Prinersip Ses oxtnerships ‘ore smal or meciumsized ents clthough there are some lerge Danehip erties. Petras does rot isve stock od tus he infomation need of Patines ore typicaly dtleent these of corporations tha have socknokles, & Parinesip has mich more fl to select speci accouning reosem "ecogntion methads and spect fnancil reporting Forme ae ne {9 Partnership wishes Yo isis np sold ue generally aac gern Gs. pemugted by the eon 10 pana har oneal pat ne tn he AUN and fen, reporting should meet those intemal information needs of Beene parinership may use non-GAAP accounting methods & format diterent rom those requited under GAA! if the financial statements ore presented 0 users, external fo the porinership. such os bank, vendors, or regulatory bodes i should be clearly identeg fn the slatements what speciic accounting methods were used by the nly so thoy the uses are informed that the information presented inthe nancial stotemens dos not conform fo GAAP. 5. in (Philip ‘comm for SMES. SMEs are defined as those entities. ‘ 1. (Do not have public accountability (Le. do no! have stock or isue'bonds na pital market] and nera-purpose financial statements for The standard presents the defirtions of tems and accounting concepts that are aule ilar to those ateady in the intemational financial accounting, and reporing 5, excep! that less detal and fewer dsciosures oré mandated and store ty s provided for the formats ofthe financiastatements, ‘Accounting fo Porinership Actives ‘ ‘Accounting for parrieship differs from accounting for a sole proprietor or a corporation {5 for as shang of profit and loss and the mei iner's Fede for each partner, and the usual partnership accounts consis of counts, ‘personal accounts, and forloans to and from partners, fo pgs MERSMIP FORMATION eet each Perret 8corded by bing the ossets coniovied, ‘ond crecting he pat tl account Pa eenrns biel conkbied oe tS HOTRINESMENE ctf vl ot the fe of decreased by wihcrowal aueoe of cash of other assets and share of net = balm rtovng re heer ha fect copta occat, Mae feta he hs emoven! of opt windows Drenngin exces ol ospcted onan vihcrawologeondiregu occas | Shape! reas ima be Sorin nt lses he maybe deed > «aig occout) ‘Avthe end of each accounting petod, thé net income ot loss in the porinersip’s Ineame Summary ledger account & fanfened fo the pares’ captal accounts» caccerdance wi the partnestip conract. % ‘On occasion, a partner's capital account may have a debit balance, called deiciency or sometimes coled a defi which occurs when the capa accounts debit balance is greater than the credit balance, A deficiency is vsvaly eliminated by ‘tional captalcontibutons. + Drawings 6+ Personal Accounts versus Capttal Withdrawals Pavnership profits cre tne business rewards of panes, So partners do have foke hore bi Noncosh Fo aan ee cso. At ptrestps mals cn crcenton ha nie af market value for pares’ wihcrawals stead rece it ot cos 'Peording a gain or [oss on these crewine 3 cond C wither P1000 rom the parmesp 2 thiy wltdrawa 0 flows: Drawing accounts provide a recerd of each partner's drawings dung on accor pero. these drawings may be compared ih tewingscOWEd I he perry? ‘agreement in order fo establish an accounting conital over exce (rawings are ao a factor in mary prof ands sharing agree rowing accoun Drawing Accounts Regardless ofthe nome given to reguior withdrawal by partners, such withdrawals are disinvestments of essentially the some ature as large and inegular withcrawai, Drawing accounts should be closed 10 the capital aecounls at the end of each ‘accounting period before a partnership balance sheet s prepared. Considering the above discussions, there ore two classes of withdrawal: 1. Capital withdrawal or permanent withdrawal Tey dtecty affect the copia! account balance because they cise msy tom withdrawals of Investment be orignal er dona. eae 2. Personal withdrawal or temporary withdrawal or crowing accounts. Tess’ ce Inia recorded in @ drawing account. More often these are. drawings fom share of pot hich wil eveniualy be closed fo copial accounts z loan Accounts tN Rr cx Paring may feceive cash from the’ partnership Inténfion of repaira th ha fransaction may be debited fo heiLeans Receivable fom Poines ledger account rather than to the parner’s drawing jess all partners ove ctherwise, these loans should bear inferest, and the Inlerest Income is recognized the parinership's income statement. (On the other hand, c partner may make a cash payment. o the: parinersip tot considered a loan rather than an increase in the pariner's capital account balance, Thé transaction s recoded by a credit fo Loans Payable fo Pariners ond normaly & ‘accom by the issuance of a'promissory note. , Agoin, partners agree otherwise, the partnership is obigated to pay inferest Of the loar dividual partner. Nole tha interes fs not required fo be paid on coPl Investments unless the partnership agreement states that capital interest is #0 be pat ‘The partnership records interest on loans as an operating expense, The folowing &"" made to record © P50.000, 10 percent, one-year loan from to the partners °° March 1, 20%6 \ parinership property zon ecelvable om pares ecu : 1 loans Payable fo parines ce doves os hans Saree a eet 8 cuTent Of ONCE Ualy open ee re the maty date Snce these ounts re selated-parly tansacton for ich, ‘Baured, ond must be repcied asaseparatebolnce wceiece ee been made by « par Pee Te eebF bane foo panne and etlement inroft and los determines how the pares coptl interest wilinctease ordecrease ‘as a result of Subsequent operations. For example, pariness may agree thot an ‘pdviduol partners to receive o one-outh cop intrest ond profit cn ls intrest of one thi * accounting for Partnership Formation ‘Cosh investments ‘Al prOperties: brought info the patiestio or acqured by the parinerstip ore Cash investments in accordance withthe c recorded at fair value most offen known ine amount payable on demand or Tae. wile in foreign curency is volved ot 1hS/euent exchange Fae, race rom ols ednced ecoverte ane Noncash investment As Soon os propery other than-cash ivested Tecorded ct tte agreed value wich sora ‘time of investment, ina porinestip, noncash property 8 the fak value ofthe property a the Fagywigsroud be detorined bf ncopendent yOUNTS put aster ah ena determined BY 6: rocco & ence te et va Fi be spelen te wien ‘Ogreement of all partners. e Partnership agreement. 'tshould be noted that in case theres co" ‘Agreed value prevails. a ‘Avonced Fiance Account A fict between agreed vale and fair valve, CHAPTER » OER Once ene ar conned he patra © memorandum entry sent ra oural ery would De requited, eh. srodby heparan ced Me EHS coftheemaining eashifows, ere! wks Pen='t The incvidvol porters must agree lo the percentoa General he co tha nt ct oe paren, na coi \\ Sole Proprietor vesus Sle Ponder $3 Conversion of end poner o anew potest: +: Partnership versus Sole Propietor Partnership versus Partnership 4. Admisson fnew parnes (lobe dicissedin Chapter 2) The Guidelines re tobe stcty folowed regarding formation: Individual versus incvidual | ‘tools of | Partnership Te ws gate ae Coie pec WA ‘ San s cere at oe Selatan to oni) ee Sole Individvad Proprietor Seeman] wh | boone Ue x ae ~ hesertre abl circa ose propio. UpsTMRSHIP FORWATION _ 131 vidual versus Sole Proprietor (New set ofbooks is used took a Se] a sil tae ‘sngertes elec heat othe oensieanen ee 1 of he Sole bic ete . Woot | aes Sele opie | oe Petr ‘ajsng ens. er Yer einen sch ve — *Fohentp ea san jeserl esr te rn bok ele Frei) “acl "evinership versus Prtneship (Od set of books _tosinentip_| Te f jing ene o aT No Singur ico ‘ ‘er Investments Se. : oats “haart ese. t a= ee ‘decoced Finance Accounting ~ . Parnerip anus Panel st of bol 85 — waar fe retenie_| ens te er ‘aig ei. ue Changenresosicccours|| Ye Roi tede ovement fw satnce Set ‘ame bot shader memento fares 7-1: Indlvidual vs, Indvidual famples re pretend below Yo appreciate the cifoent WaNS of fomting -Astmpton 2 Assing hat Fond G ogre that each parners to receive on equal conte Torecord atm sting fo ods sce both of hem have no et of bocks- Te lose he bok ning to cbse srs bof hem Raven sa of Book Torecotnvesnent Panenip books: ‘nus “Fen Rn A ‘Advanced Fiance Accounting A Comprehensive Cncaptaal Bi 10 nus apeoach Over ceca cay done Sa me? ce stration 17-2: Individual vs. Sole Proprietor i : Below's he balance shee! of Hon November 3,204 Before GCCEPING OSH png CHAPTER y nr cast orca ero 00 onsite er Via Piabsro i teas! 00 ‘ecu epee 000 repatleperie 20 iteapi 2010 cca Be dese onset 000 a ere Te a oft Ha ORT SRT Re cto osnrt sne rontoranra os goon hee! ‘onan To close he books Aras Tx SOIT ROO ai ‘ecules cepecton rd secnedeere amo scouts pope snow eespoyebe 500 cope! a0 ons ‘ooo eerie pry bre eceat “0 decountrecehetie 0 Ierchond ret iso frepad oper vo Eaten! aoe compare can New Sto Books (anes Book record nvesments: Cas aa Noles 000 vores econ. a decounsrecerate ao ‘Mecrorcie wv. ae Pepa omens “om foment i sau ‘ower fet dbus accounts ‘010 ‘eared eer sis ‘ecouns payee item Notspopbe.. Rom opt. oe nts eset oa 9678 | co. : et lives ae he tres ead bet orto rr ihn 2 Tot be opti taxa cnn [iit mond tl cxenie oer ot cae mer ere anes contain. he oie & et he Pe arount wi be cere eden hearing ered a prc! —— “And Pant hag “A opr Coc 4 pernERsHIP FORMATION 1, Fan unecnde pce onan Peat stove Re oral coh notes oho tinier ‘lonce eet fo. ond K on October 1.24 beer ousmens or en ei . mec ie Cai E a (som x ao van 2 vdeo ae v (umn f | ea | Tol Asa = fe ae ‘aaced Fn Aabuing =A Comore 238 EMAPTER y Fimo ese a = a holo som estas - sna folate oid eam |» weg ‘Assumplion 1 Olds of books. Assuming the Books of Ks tobe retened bythe new the folowing procedures ar obo foloned: Paro, Sole Proper v. Sole opilor Tirooks ot |W toate Sele roster | sole rope Yer Yer i ve Ne coun : bevesinans. chia Yes = Bool eo ‘a copa A co ao CHAPT e. eS ppevesesnr? FORMATION tobe folowed: Assumplion 2: New st of books, Te following procedtres oe 10 Sole Proprietor vs. Sole Sole ropietot aya | (R)Booksat [New Sefor Books Sole fropletr_| Sol Propo. “ig ores Yes Yes Cling ees, Weateccouns) | Yes te Irvesiments Yor clone Shee! Ye Books of Sole Proprietor record adjustments: Boots IT oaks pre. Ta060 Weschanda vento... S000 ‘Merchandise vero | roma |“ Kcoplal... sin ores ere Upwarsrebton copa... a0 co. coo ‘Alowancs fx doubt ‘vnc i ii S sasiera Accounts. com | “Sequestonce: Ack or ‘Serica. 77500 are hewaus once... $000 sestonsromion B20 nl rocevOBe ToDRH Tecoptseeseveessee+ 8000 dcop oom | Solaiespayabie. 0, eome eared. pa tes Toes i Reap. 00 res rca tom Au "ie Oe. 5000 TRS Teopt am fice sorts 000 sted ce neces Th copti.. 500 ‘nccumdaiod depreciation sequpment eee 5000 nie deren Toa Toa ‘ouucied defector: ise oe es, 000 unde soe. copia a eres pay. 10 lores exer Sty No etobart Pag e302 Trent. Tov A060 Kopi cvvveve 0900 scored paint — The balance shee tr formations fll: secuted "Prepare ents fo record fhe foriaton of rnentiposuming hot A and B agree that teach pariner if receve « copter! eras ei equ fo the aged vues of he et exes 2, Prepare ents to record the fomaton cf parnentp suming hat A ond 8 ‘each porineris fo receive an equal capltlinerert, sr |\-PorineipFoomation: Bonus and Geodl Methods {sas to ves he pxtnetip, beh lahn ond ef beeve ta! hr expences 0 ec ‘late appear. wavabl el needed bythe past ands @ basso grog her a ‘pel eres nthe parent. | -tequted: Asurrirg that each panes to receive cn qual coptnresn he panes, Ty Record he parent erraion under elbons method. | 2 Record he pornechip formation vader the good fev of aise method, ort ‘sume tefl good otal csmen of 90000. 4. Dsus the apofoproteces of sng eter he bonus: good metodo eco The 1 fomation ofthe parent Tom and Jule formed a management consiting arinestip on Jonny 1,204 The vale = 1M Penrsiprensactons ond Copal Stlements ssa pe wierow P5000 ond le wie ons Yo: Ton a nfo pelea baad nthe og ee ‘nvestment, Nequred: |) Prepore journal ents to: 2, Recor hell investment inthe peamensP ‘Mbvonced cag “A meee pl eA} Pr2000in onicbaton of operating rd wunes Record te wincrowas fe ‘Chose the Income Summary and Drawing accout 2. Prepare a sotement of changes in pores’ captal athe YeOr ended Deceme 2014 1V-Peneship Formaton -Inevidvol versus Sle Proprietor The batons Prine Es nled below: '@. Prepaid expenses of P2.400 and accrued expenses of P7.200 are to be recognized. isto vest cash to oblon oon ieet in he pares. “Toned andl hcg ACh: lg Reick ERD ITT she fH on November 30, 284 Delo GECEDATG | 5 Pane fy we pager ee 1245 roan on bvet mate ¢ Mevmel teen sole obect ti, ore opie ee > reson urcered pont ena et Bak ccs fom Ihave oRinaes peg, 0D or Fe he aka cash re re a ae se penis be pana wi ke ove he aa on ‘Rovary 1, 2004 oth "ecu: oerine he felonies ae ome ‘Total capil atime. 1. Toosets 7 rts aera ST (GipputiPbt LM LICE PRopLey, ae tn 2 equal Ken's P50000 cash, od coduil evaiuaten oon on Brees Comverse fs on es 20%, 0% ond A reece ‘don ?500 reece. exten cacg a. Pm000 ‘e,4S000 . r.o00 3 P00 2, On.dy 1M ond P famed a pant, ogresing 0 share profs and loses hea gy 4:4 expecta. ML contouted 9 parca of contac, 50,00 cosh The lod wes sid for P5000 on cus ate formeton of Perinertip. How much shoud be receded in account on the parents formation? 2. Pi0o% <. raso0 ‘ 5. pano00 P5000 5 © ss00 pn “og 78 Sam 2 0 3. Paul, Jeremy, ond Juan are fering « porietp. on contiutes a bulsng having on 4 Gaerch | 2 He des cot nen ndo hisleteol cost, accumulated depreciofon, ond market vove of 230.000, PIEc,00, ona Cr balance siocs f won on cine ta em seni, 40,000 respecvely. Te bulking aly reared on the parent's books fun, fe ook va (190,00) Two yas oe the bulcng sid fora PZ70.000 gon. What pion the prot rls shold be alocaled fo ont 3°. Fam c. F210000 b,_P.000 a 6230000 " & Abert, Cloud, ol sani fam a penripby contin P2000, P7000 ond FQ an, respectively. ncn, in patns ores that Abert shoud receive 20000 of good becouse of is speci’ ss relevant fo fis bushes. Whal emeunt of copa we fy Claude wien the porineship is formed? P6000 cc. Proge0 b. P65000 Some othér ameynt 5. Max lke, ond Tony ae forming a pariership. The approised valve of assets contouied 0,000, P80.000, and P100.00, respectively. In addon, Max ond Tony ogre erpetence is worh 0000. The parines dese fo apply the bonus method wre . ese the co ‘eppicable. What the foto corialrecrded a he date the parinrip's formed? feat 0 be enue b Zu000) Ai fm oterpet ‘amount

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