The content and organization of chapter 12 are as

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Mathematics: A Practical Odyssey
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Chapter 5 / Exercise 19
Mathematics: A Practical Odyssey
Johnson/Mowry
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The content and organization of Chapter 12 are as follows. Preview of CHAPTER 12 Accounting for Partnerships Partnership Form of Organization • Characteristics • Organizations with partnership characteristics • Advantages/disadvantages • Partnership agreement Basic Partnership Accounting • Forming a partnership • Dividing net income/loss • Financial statements Liquidation of a Partnership • No capital deficiency • Capital deficiency A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are sometimes used in small retail, service, or manufacturing companies. Also accountants, lawyers, and doctors find it desirable to form partnerships with other professionals in the field. Characteristics of Partnerships Partnerships are fairly easy to form. People form partnerships simply by a verbal agreement, or more formally, by written agreement. We explain the principal characteristics of partnerships in the following sections. ASSOCIATION OF INDIVIDUALS A partnership is a legal entity. A partnership can own property (land, buildings, equipment), and can sue or be sued. A partnership also is an accounting entity. Thus, the personal assets, liabilities, and transactions of the partners are excluded from the accounting records of the partnership, just as they are in a proprietorship. The net income of a partnership is not taxed as a separate entity. But, a part- nership must file an information tax return showing partnership net income and each partner’s share of that net income. Each partner’s share is taxable at per- sonal tax rates , regardless of the amount of net income each withdraws from the business during the year. MUTUAL AGENCY Mutual agency means that each partner acts on behalf of the partnership when engaging in partnership business. The act of any partner is binding on all other part- ners. This is true even when partners act beyond the scope of their authority, so long as the act appears to be appropriate for the partnership. For example, a partner of a Partnership Form of Organization Association of Individuals Mutual Agency Study Objective [ 1 ] Identify the character- istics of the partnership form of business organization.
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Mathematics: A Practical Odyssey
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Chapter 5 / Exercise 19
Mathematics: A Practical Odyssey
Johnson/Mowry
Expert Verified
Apago PDF Enhancer grocery store who purchases a delivery truck creates a binding contract in the name of the partnership, even if the partnership agreement denies this authority. On the other hand, if a partner in a law firm purchased a snowmobile for the partnership, such an act would not be binding on the partnership. The purchase is clearly outside the scope of partnership business. LIMITED LIFE Corporations have unlimited life. Partnerships do not. A partnership may be ended voluntarily at any time through the acceptance of a new partner or the withdrawal of a partner. It may be ended involuntarily by the death or incapacity of a partner.

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