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Summary of Partnership Financial Accounting

Summary of Partnership Financial Accounting - TAX 6317...

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TAX 6317 SUMMARY OF FINANCIAL ACCOUNTING FOR PARTNERSHIPS Unlike corporations with widely disbursed ownership, partnerships are closely-held business entities that primarily generate information for a relatively small number of owner/investors. Additionally, since partnerships have limited life, the application of historical cost principles is also somewhat unique. The most significant of these attributes are discussed below: Life of the Partnership : A partnership is an entity based upon a fixed agreement (oral or written) among its partners. The responsibilities and operating rules for partnerships generally follow the Revised Uniform Partnership Act. Anytime the ownership of a partnership changes, the old partnership terminates and new partnership is formed. While externally, outsiders may not perceive anything other than a possible change in name, there are significant internal changes on the books of the partnership. The old partnership is deemed to have terminated and a new partnership is formed. The values of all assets, liabilities, and capital accounts are restated to market value. This restatement process is the primary distinction between partnerships and other business entities that adhere to the historical cost principle regardless of changes in ownership.
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