Partnership Formation Lecture Notes

  • November 2019
  • PDF

This document was uploaded by user and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this DMCA report form. Report DMCA


Overview

Download & View Partnership Formation Lecture Notes as PDF for free.

More details

  • Words: 506
  • Pages: 3
PARTNERSHIP DEFINITION A CONTRACT WHEREBY TWO OR MORE PERSONS CONTRIBUTE MONEY OR INDUSTRY TO A COMMON FUND WITH THE INTENTION OF DIVIDING THE PROFITS AMONG THEMSELVES. (Art. 1767 Civil Code of the Philippines) -AN ASSOCIATION OF TWO OR MORE PERSONS WHO CO-OWN A BUSINESS FOR A PROFIT. CHARACTERISTICS 1.

Separate legal personality

2.

Mutual agency

3.

Limited life

4.

Unlimited liability

5.

Co-ownership of property

6.

Co-ownership of profits

ADVANTAGES ease of formation and dissolution unlimited liability better management flexibility in decision making greater capital compared to sole proprietorship

DISADVANTAGES easily dissolved/limited life unlimited liability difficulty in transferring ownership conflict among partners lesser capital compared to corporation

ARTICLES OF CO-PARTNERSHIP -this agreement is a framework which governs the formation, operations, dissolution and liquidation of the partnership. CONTENTS: 1.

Name and nature of the partnership.

2.

Date on which the partnership contract takes effect and duration of such contract.

3.

Names of partners, and partners’ investments.

4.

Authority, rights and duties of each partner.

5.

Accounting period to be applied, and accounting and auditing of partnership books.

6.

Method of sharing profits and losses.

7.

Provision of the arbitration of disputes and liquidation of the partnership.

KINDS OF PARTNERSHIP Non-Trading Partnership Trading Partnership General Partnership Limited Partnership Universal Partnership of All Present Property Universal Partnership of All Profits Particular Partnership

KINDS OF PARTNERS Capitalist Partner Industrial Partner Capitalist- Industrial Partner General Partner Limited Partner Nominal Partner Secret Partner Silent Partner

CONVERSION OF SOLE PROPRIETORSHIP INTO A PARTNERSHIP Books of Sole Proprietorship 1. Adjust or revalue the assets of the sole proprietorship according to the agreement. Adjustments are made to the Proprietor’s Capital account. 2. Close the books Books of the Partnership 1. Record the investments of the Sole Proprietor.( at adjusted amounts) 2. Record the investments of other partners. Example of Adjustments/Revaluation of Assets: 1. Merchandise Inventory per John’s book

P100,000

Adjustment: Merchandise Inventory is to be recorded at its fair value of P75,000. Adjusting Entry: John, Capital 25,000 Merchandise Inventory 25,000 To revalue merchandise inventory. 2. Accounts Receivable per John’s book P100,000 Allowance for Bad Debts 15,000 Adjustment: 10% of the Accounts Receivable is estimated to be uncollectible Adjusting Entry: Allowance for Bad Debts 5,000 John, Capital To adjust bad debts allowance

5,000

EXERCISE 1-5 Books of Francis 1. Adjusting Entries Oct 1 Francis, Capital

2,800 Allowance for Bad Debts 2,800

To adjust bad debts allowance 1

Landscaping Supplies

10,000

Francis, Capital To revalue landscaping supplies 1

Francis Capital

10,000 100,000

Accumulated DepreciationFurniture and Equipment To revalue furniture and equipment 2. Closing Entries Oct 1 Allowance for Bad Debts Accumulated DepreciationFurniture and Equipment Accounts Payable Francis, Capital Cash Accounts Receivable Landscaping Supplies Furniture and Equipment To close the books of Francis.

100,000

10,800 200,000 565,000 1,634,200 130,000 720,000 550,000 1,000,000

BOOK OF PARTNERSHIP Oct 1

Cash Accounts Receivable Landscaping Supplies Furniture and Equipment Allowance for Bad Debts Accounts Payable Francis, Capital To record the investment of Francis 1

Cash Pio, Capital To record the investment of Pio

130,000 720,000 550,000 800,000 10,800 565,000 1,634,200 1,634,200 1,634,200

Related Documents

Lecture Notes
June 2020 23
Lecture Notes
October 2019 52
Lecture Notes
October 2019 39