12 - Presentation Deck - ACC 211: PRINCIPLES OF ACCOUNTING...

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ACC 211: PRINCIPLES OF ACCOUNTING CHAPTER 12: Accounting for Partnerships PRESENTATION DECK Prepared by: Jill Mitchell, Assistant Professor, NOVA Reference: Weygandt, Jerry, Kieso, and Kimmel. Accounting Principles Unless noted, illustrations are from the referenced text.
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Chapter 12-2 1.1 Identify the characteristics of the partnership form of business organization Chapter 12: Accounting for Partnerships Course Competencies 2. Basic Partnership Accounting 1. Partnership form of Organization 2.1 Know the accounting entries for the formation of a partnership 2.2 Know the accounting entries for the allocation of income/loss
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Chapter 12-3 Partnership Form of Organization Partnership: an association of two or more persons to carry on as co-owners of a business for profit; Partnerships can be formed by verbal agreement or more formally by written agreement Characteristics of a Partnership: 1. Association of individuals – a legal entity that can own property, sue or be sued. Also, it is an accounting entity, therefore, the personal assets, liabilities, and transactions of the partners are excluded from the accounting records. The net income of a partnership is not taxed as a separate entity; each partner’s share is taxable at personal tax rates. 2. Mutual agency – each partner acts on behalf of the partnership when engaging in partnership business. The act of any partner is binding on all other partners if the act appears to be appropriate for the partnership. 1.1 Identify the characteristics of the partnership form of business organization
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12-4 3. Limited Life – A partnership may be ended voluntarily at any time through the acceptance of a new partner or the withdrawal of a partner. May be ended involuntarily by the death or incapacity of a partner. Partnership dissolution occurs whenever a partner withdraws or a new partner is admitted 4. Unlimited Liability – Each partner is personally and individually liable for all partnership liabilities. creditors’ claims attach first to the partnership assets. If these are insufficient, the claims attach to the personal resources of any partner. 5. Co-ownership of Property – Partners jointly own partnership assets. If partnership is dissolved, each partner has a claim on total assets equal to the balance in his respective capital account. Net income is also co- owned. If the partnership contract does not specify to the contrary, all net income or net loss is shared EQUALLY by the partners. Partnership Form of Organization
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12 - Presentation Deck - ACC 211: PRINCIPLES OF ACCOUNTING...

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