Archive about 'Partnership Accounts'

Revaluation of Assets Before Admission Of New Partner(s)

When admitting a new partner/change in partnership, sometimes there is a need to assess true assets value of the existing partnership. This article deals with any profit or loss arising from such revaluation.

Revaluation Of Assets

· Open a Revaluation Account to show the increase or decrease of the firm’s assets value:

Revaluation Account

Debit

Credit

Decrease in Assets Value

Increases in [...]

Listing Of All Articles On Accounting For Partnerships

Append below a summary of articles on Partnership Accounting:

INTRODUCTION TO PARTNERSHIP

Types Of Organization-Structure -Partnership

Difference Of The Financial Statement Between Sole Proprietorship And Partnership

FORMATION OF PARTNERSHIP

Accounting For Partnership-Formation Of Partnership And Capital Account

Accounting For Partnership-Partner’s Withdrawal Account

Valuation or Computation Of Goodwill In A Partnership

ACCOUNTING FOR GOODWILL UPON ADMISSION OF NEW PARTNER

Accounting Treatment For Goodwill On Admission [...]

Simple Illustration On Partnership’s Dissolution

Earlier article regarding partnership’s summary of steps upon the dissolution of a partnership. Append below a very basic illustration on this.

Jim and John are partners sharing profits or loss in the ratio 50:50 respectively. Both agree to dissolve the partnership and their Balance Sheet at the date of dissolution 31 December 2007 is as follows:

[...]

Summary Of Step To Close Partnership’s Book Upon Dissolution

For the reader’s quick information/reference, append below a summary of steps to close the partnership books upon dissolution:-

STEPS TO CLOSE THE PARTNERSHIP BOOKS ON DISSOLUTION

Open a Realization Account.

Transfer the book value of assets to this Realization Account by:

Debit: Realization Account
Credit: Asset Accounts (book value of assets)

Transfer the cash account with any expenses on realization [...]

Reasons Or How Will Partnership Dissolution Occurs

Append below a listing of what might be the rational/reasons for the dissolution of a partnership:

Dissolution may occur for the following reasons:
· Upon expiry of the term( time period ) fixed in the partnership agreement
· Partners do not agree among themselves
· Death of a partner
· Bankruptcy of a partner
· Business running losses and [...]

Accounting Treatment for Goodwill On Admission Of Partners ( Part 2 of 3 )

Earlier, method 1 wherein goodwill Recorded in FULL in the books had been discussed.

The second method is as follows:

Method No. 2:
SCENARIO NO 1: Where Goodwill is NOT recorded in the books

· Goodwill is not recorded in the books hence NO goodwill account is open
· Incoming partner pay his proportion [...]

Accounting Treatment for Goodwill On Admission Of Partners(Part3of3)

Earlier Method 1 and Method 2 have been discussed.

The third method is as follows:

Method No. 3: Goodwill is NOT recorded in the books and paid DIRECT to the existing/old partners

· No record in the partnership’s books
· Least advantageous to incoming partners as the money which he pays for goodwill is not [...]

Accounting Treatment for Goodwill On Admission Of Partners(Part1of3)

It is very important to note that goodwill at the time of an admission belongs entirely to the existing partners who have created it. Refer to earlier articles on what’s goodwill, how it comes about, etc.

Basically, there are three (3) ways of valuing goodwill on admission of partners.

The first method is as [...]

Answer To Accounting Test Question No. P1 On Partnership’s Profit & Loss Appropriation

Answer Paper to Accounting Test Question No.P 1 on Partnership’s Profit & Loss Appropriation
Jim & John
Profit & Loss Appropriation for the year ended 31 December Year 2007

Net Profit b/d

90,000

Interest on capital:
Jim: 6% x $40,000=$2,400
John:6% x $30,000=$1,800

4,200

Interest on drawings:
Jim: 6% x $30,000=$1,800
John:6% [...]

Accounting Test Question No. P1 On Partnership

Earlier article regarding partnership’s format of a profit & loss appropriation account. The below question illustrates a simple profit & loss appropriation:-

Jim and John are partners sharing profits or loss in the ratio 1/2 and 1/2 respectively.
On 1 January 2007, their Capital and Current Accounts are as follows:

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