chapter12 - CHAPTER 12 Accounting for Partnerships ACCT100...

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Chapter 12-1 Accounting for Partnerships CHAPTER 12 ACCT100 Autumn 2011 Teresa Chu Chapter 12-2 Partnership An association of 2 or more persons who co-own a business for profit Examples: accountants, lawyers, doctors, etc. Features: 1. Association of individuals Partnership: Separate entity, not taxed Partners: Share net income, personal tax return 2. Mutual agency 3. Limited life (e.g. admission/withdrawal of partner) 4. Unlimited liability 5. Co-ownership of property Partner’s claim on total assets in partnership dissolution = Partner’s capital balance
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Chapter 12-3 Advantages: – Combining skills and resources of more individuals – Ease of formation – Few government regulations and restrictions – Ease of decision making (no BOD) Disadvantages: – Mutual agency – Limited life – Unlimited liability Chapter 12-4 “Partnership agreement” or “Articles of co-partnership” – Oral or written – Purpose of business – Date of inception – Basis for sharing net income/loss – Provision for assets withdrawals – Procedures for submitting disputes to arbitration – Procedures for partner admissions/withdrawals – Rights and duties of surviving partners in case of death of a partner
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Chapter 12-5 Record partner’s initial investment at FV of assets at date of transfer to partnership Forming a Partnership E12-2 K. Meissner, S. Cohen, and E. Hughes are forming a partnership. Meissner is transferring $50,000 of cash to the partnership. Cohen is transferring land worth $15,000 and a small building worth $80,000. Hughes transfers cash of $9,000, accounts receivable of $32,000 and equipment worth $19,000. The partnership expects to collect $29,000 of the accounts receivable. Instructions: Prepare the journal entries to record each of the partners’ investments. Chapter 12-6 K. Meissner, Capital 50,000 Cash 50,000 S. Cohen, Capital 95,000 Land 15,000 Building 80,000 E. Hughes, Capital 57,000 Cash 9,000 Accounts receivable 32,000 Equipment 19,000 Allowance for doubtful accounts 3,000 Exercise: P12-1A (a) and (b)
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Chapter 12-7 Dividing Net Income or Net Loss Share net income/loss equally unless partnership agreement indicates otherwise (e.g. income ratio) Closing entries: Individual revenues XX Income summary XX Income summary
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This note was uploaded on 09/09/2011 for the course ACCT 100 taught by Professor T.chu during the Spring '11 term at University of Macau.

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chapter12 - CHAPTER 12 Accounting for Partnerships ACCT100...

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