(Advanced Accounting Part 1)

LECTURE AID

2016

ZEUS VERNON B. MILLAN

AA PART 1: Zeus Vernon B. Millan

 PARTNERSHIP
Overview on the topic:
Chapter Title Sub-topics___

1 Partnership - Part 1 Partnership Formation

2 Partnership –Part 2 Partnership Operations

3 Partnership–Part 3 Partnership Dissolution

4 Partnership–Part 4 Partnership Liquidation

AA PART 1: Zeus Vernon B. Millan

Chapter 1 Partnership (Part 1)
Learning Objectives

• Differentiate between the accounting for

partnerships, sole proprietorships, and
corporations.
• State the valuation of contributions of
partners.
• Account for the initial investments of the
partners to the partnership.
• State the peculiar accounts used in a
partnership and identify the transactions
that affect these accounts.
AA PART 1: Zeus Vernon B. Millan
Partnership

• A partnership is an unincorporated association of two or

more individuals to carry on, as co-owners, a business,
with the intention of dividing the profits among
themselves.

AA PART 1: Zeus Vernon B. Millan

Characteristics of a partnership

1. Ease of formation 
2. Separate legal personality  
3. Mutual agency
4. Co-ownership of property
5. Co-ownership of profits
6. Limited life
7. Transfer of ownership
8. Unlimited liability (this is applicable to a general
partnership)

AA PART 1: Zeus Vernon B. Millan

Accounting for partnerships

• The following are the major considerations in the

accounting for the equity of a partnership:
1. Formation – accounting for initial investments to the
partnership
2. Operation – division of profits or losses
3. Dissolution – admission of a new partner and withdrawal,
retirement or death of a partner
4. Liquidation – winding-up of affairs

AA PART 1: Zeus Vernon B. Millan

Valuation of contributions of partners

• All assets contributed to (and related liabilities

assumed by) the partnership shall be measured
at fair value.

AA PART 1: Zeus Vernon B. Millan

Partners’ ledger accounts

1. Capital accounts
2. Drawing accounts
3. Receivable from/ Payable to a partner

AA PART 1: Zeus Vernon B. Millan

Bonus on initial investments

• A bonus exists when the capital account of a partner is

credited for an amount greater than or less than the fair
value of his contributions.
• The bonus is treated as adjustment to the capital
accounts of the other partners.

AA PART 1: Zeus Vernon B. Millan

• OPTIONAL APPLICATIONS: (PROBLEM 1-2)

SEAT WORK:
(PROBLEM 1-5: CLASSROOM ACTIVITY)

AA PART 1: Zeus Vernon B. Millan

 OPEN FORUM
QUESTIONS????
REACTIONS!!!!!

AA PART 1: Zeus Vernon B. Millan

IFA PART 1A: Zeus Vernon B. Millan
 END
CLASSROOM ACTIVITIES: PROBLEM 9-7: #’s 1 & 2

AA PART 1: Zeus Vernon B. Millan