actpaco 5 - unit 5 partnership dissolution with liquidation...

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unit 5 partnership dissolution with liquidation liquidation of a partnership means winding up the business usually by selling the assets, paying the liabilities, and distributing the remaining cash to partners. a business which is in the process of converting its assets into cash and making settlement with creditors is said to be in liquidation . in this unit, emphasis will be placed on the accounting problems and procedures involved in the winding up (liquidation) of the partnership affairs. when the business is to be liquidated, the account must be adjusted and closed, and the resulting income or loss in the final period is transferred to the capital accounts of the partners. the basic objectives of a partnership during liquidation process are to convert the partnership assets to cash, to pay off partnership obligations and to distribute cash and any unrealized assets to the individual partners. dissolution with liquidation 1. a partnership is liquidated when its business operations are completely terminated or ended. 2. it may be caused by any of the following factors: a. the purpose for which the partnership was organized has been accomplished. b. the term/period covered by the partnership contract has terminated. c. the firm became bankrupt. d. the partners mutually agree to close the business. 3. partnership assets are sold. 4. partnership creditors are paid. 5. remaining assets are distributed to the partners as a return of their investments. definition of terms marivic valenzuela-manalo 1
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1. dissolution – the termination of the life of the partnership. 2. liquidation – the process of winding up a business which normally consists of conversion of assets into cash, payment of liabilities and distribution of remaining among the partners. 3. realization – the process of converting non-cash assets into cash. 4. gain on realization – the excess of the selling price over the carrying amount of the non cash assets sold through realization. 5. loss on realization – the excess of the carrying amount over the selling price of the non cash assets sold through realization. 6. capital deficiency – the excess of a partner’s share on losses over his capital balance resulting to a debit balance in the capital account. 7.
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actpaco 5 - unit 5 partnership dissolution with liquidation...

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