PARTNERSHIP AND CORPORATION

PARTNERSHIP FORMATION

BY: PROF. VERLITA V. MERCULLO , C.P.A.

 Partnership Formation

• Journal Entries to form Partnership:

• A) individuals with no existing business form a
partnership
Mr A and Ms B and Ms C agreed to form a partnership with
capital contribution as follows: A, Cash 500,000, B cash of
300,000 and C pc. of land worth 200,000.
• MR A = CASH = 500,000
• MR. B- CASH = 300,000
• MR. C - LAND = 200,000

• DEBIT CREDIT

• CASH 500,000
• CASH 300,000
• LAND 200,000

• A, CAPITAL 500,000
• B, CAPITAL 300,000
• C, CAPITAL 200,000
Journal Entry: Debit Credit

Cash 800,000

Land 200,000

A Capital 500,000

B Capital 300,000

C Capital 200,000

Individuals with no existing business form a partnership

 A sole proprietorship and an individual without an existing business
form a partnership

Popoy has a business as single proprietor, His books of accounts as of December 31,
2020 is:

Assets ( Cash included) 5,000,000

Liabilities 200,000
Capital 4,800,000

He admitted Basha to form a partnership BasPoy Milk tea with Basha contributiong
4,800,000 capital for a ½ interest in the partnership

Journalize the transaction.

POPOY ASSET 5,000,000
LIABILITIES 200,000
CAPITAL 4,800,000 A= L+C

NEW BOOK OF PARTNERSHIP

DEBIT CREDIT

ASSET 5,000,000
LIABILITIES 200,000
POPOY, CAPITAL 4,800,000
ASSET 4,800,.000
BASH , CAPITAL 4,800,000
BOOK OF POPOY

DEBIT CREDIT

LIABILITIES 200,000
CASH 200,000

NEW BOOKS

CASH 4,800,000
CASH 4,800,000
POPOY , CAPITAL 4,800,000
BASH, CAPITAL 4,800,000
Books of Popoy Books of Bas Poy

Payment of Liabilities

Liabilities 200,000 Cash 9,600,000

Cash 200,000 Basha Capital 4,800,000

Poy Capital 4,800,000 Popoy,Capital 4,800,000

Assets 4,800,000
 2 single proprietor joined to form a partnership:

Mr. E MR F
Cash 100,000 160,000
Accounts Receivable 40,000 20,000
Fixed Asset (net) 120,000 70,000
Accounts Payable ( 20,000) ( 10,000)
Capital (240,000) (240,000)

1. Close entries on books of E Close entries on Books of F

E Capital 240,000 F Capital 240,000
Accounts Payable 20,000 Accounts Payable 10,000
Cash 100,000 Cash 160,000
Accounts Receivable 40,000 Accounts Receivable 20,000
. Fixed Asset 120,000 Fixed Asset 70,000

2. Open Entries for the Partnership

Cash 260,000
Accounts Receivable 60,000 _________CASH____________
Fixed Asset 190,000 DEBIT CREDIT
Accounts Payable 30,000 100,000 100,000
E Capital 240,000 260,000
F. Capital 240,000
 2 single proprietor joined to form a partnership:

Mr. E MR F
Cash 100,000 160,000
Accounts Receivable 40,000 20,000
Fixed Asset (net) 120,000 70,000
Accounts Payable ( 20,000) ( 10,000)
Capital (240,000) (240,000)

1. Close entries on books of E Close entries on Books of F

E Capital 240,000 F Capital 240,000
Accounts Payable 20,000 Accounts Payable 10,000
Cash 100,000 Cash 160,000
Accounts Receivable 40,000 Accounts Receivable 20,000
. Fixed Asset 120,000 Fixed Asset 70,000
2. Open Entries for the Partnership

Cash 260,000
Accounts Receivable 60,000
Fixed Asset 190,000
Accounts Payable 30,000
E Capital 240,000
F. Capital 240,000
A. MR. X , Y , AND Z FORMED A PARTNERSHIP
AND INVESTED THE FOLLOWING:

MR. X = CASH = 50,000

MR. Y = FURNITURE = 40,000
MR. Z = EQUIPMENT = 30,000

B. MR. JAWO OWNED A BUSINESS AND ACCEPTED MR. JAMES AS PARTNER

INTO NEW BUSINESS.

MR. JAWO OLD BOOKS SHOWN AS FOLLOWS:

CASH = 65,000
ACCOUNTS RECEIVABLE = 75,000
LIABILITIES 30,000
CAPITAL 110,000 ( LIABILITIES ARE ASSUMED BY THE NEW
BUSINESS )

MR. JAMES CONTRIBUTIONS TO THE BUSINESS ARE AS FOLLOWS:

CASH = 70,000
CAR 150,000
ANSWER:
A. MR. X , Y , AND Z FORMED A PARTNERSHIP
MR. X= Cash- 50,000
MR. Y= Furniture- 40,000
MR. Z= Equipment- 30,000

DEBIT CREDIT
Cash 50,000
Furniture 40,000
Equipment 30,000
MR. X Capital 50,000
MR. Y Capital 40,000
MR. Z Capital 30,000
120,000 120,000
B. MR. JAWO OWNED A BUSINESS AND ACCEPTED MR. JAMES AS PARTNER
INTO NEW BUSINESS.

MR. JAWO MR. JAMES

CASH = 65,000 CASH=70,000
ACCOUNTS RECEIVABLE = 75,000 CAR= 150,000
LIABILITIES= 30,000
CAPITAL= 110,000

BOOK OF MR. JAWO

DEBIT CREDIT
ASSET 140,000
LIABILITIES 30,000
MR. JAWO CAPITAL 110,000

BOOKS OF NEW PARTNERSHIP

CASH 110,000
CASH 220,000
MR. JAWO CAPITAL 110,000
MR. JAMES CAPITAL 220,000
320,000 320,000
C. MR. R AND MS. M HAS THE FOLLOWING
BUSINESS :

MR. R MS. M

CASH 35,000 45,000

ACCT. RECBLE 40,000 30,000
FIXED ASSET 75,000 80,000
LIABILITIES ( 25,000 ) ( 30,000)
CAPITAL (125,000) (125,000)

REQUIREMENTS: 1. CLOSE THE BOOK OF THE OLD

BUSINESS
2. OPEN THE BOOK OF A NEW BUSINESS
C.MR. R AND MS. M 2 SINGLE PROPRIETOR PARTNERSHIP

1. Close entries on book of Mr. R

DEBIT CREDIT
R Capital 125,000
Liabilities 25,000
Cash 55,000
Acct. Receivable 40,000
Fixed Asset 75,000
Close entries on books of Ms. M
M Capital 125,000
Liabilities 30,000
Cash 45,000
Acct. Receivable 30,000
Fixed Asset 80,000

2. Open the book for new business

Cash 80,000
Accts. Receivable 70,000
Fixed Asset 155,000
Liabilities 55,000
R. Capital 125,000
M. Capital 125,000
305,000 305,000
THANK YOU