LA CONSOLACION UNIVERSITY PHILIPPINES A.F.

ISIP
PARTNERSHIP ACCOUNTING LECTURE 05 – PARTNERSHIP LIQUIDATION

Below is the condensed statement of financial position of Daniella, Emma and Flora Partnership on April 30, 2019, the
day the partners decided to liquidate the business:

Assets Liabilities and Capital

Cash P20,000 Liabilities P28,000
Other assets 80,000 Daniella Loan 2,000
Daniella Capital (40%) 9,000
Emma Capital (40%) 21,000
Flora Capital (20%) 40,000
Total Assets P100,000 Total Liabilities and Capital P100,000

Partner’s loan account is not closed to partner’s capital account. But partners’ capital balances before realization should
be after closing the following accounts, if any:

a. Partners’ drawing
b. Partnership goodwill account
c. Receivable from partners
d. Payable to partners

Prepare statement of liquidation and journal entries under the following situations:
1. Assume that the other assets, P80,000, were realized at P60,000 thus resulting to the total loss of P20,000. (Loss on
realization, fully absorbed by partners’ capital balances)
2. Assume that the other assets were realized at P55,000 resulting to a loss of P25,000. (Loss on realization resulting
capital deficiency to a partner with a loan account)
3. Assume that the other assets were sold at P49,500, thus resulting to a loss of P30,500 to be divided among the
partners using the profit and loss ratio. (Loss on realization resulting capital deficiency to a solvent partner)
4. In the preceding case, Daniella is personally insolvent. Emma and Flora absorbed her deficiency.