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ch12.ppt
- 1. Chapter 12-1 ACCOUNTING FOR PARTNERSHIPS Accounting Principles, Eighth Edition CHAPTER 12
- 2. Chapter 12-2 Accounting for Partnerships Partnership Form of Organization Basic Partnership Accounting Liquidation of a Partnership Characteristics Organizations with partnership characteristics Advantages / disadvantages Partnership agreement Forming a partnership Dividing net income / loss Financial statements No capital deficiency Capital deficiency
- 3. Chapter 12-3 A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Partnership Form of Organization LO 1 Identify the characteristics of the partnership form of business organization. Type of Business: Small retail, service, or manufacturing companies. Accountants, lawyers, and doctors.
- 4. Chapter 12-4 Characteristics of Partnerships LO 1 Identify the characteristics of the partnership form of business organization. Association of Individuals Legal entity. Accounting entity. Net income not taxed as a separate entity. Mutual Agency Act of any partner is binding on all other partners, so long as the act appears to be appropriate for the partnership.
- 5. Chapter 12-5 Characteristics of Partnerships LO 1 Identify the characteristics of the partnership form of business organization. Limited Life Dissolution occurs whenever a partner withdraws or a new partner is admitted. Dissolution does not mean the business ends. Unlimited Liability Each partner is personally and individually liable for all partnership liabilities.
- 6. Chapter 12-6 Characteristics of Partnerships LO 1 Identify the characteristics of the partnership form of business organization. Co-ownership of Property Each partner has a claim on total assets. This claim does not attach to specific assets. All net income or net loss is shared equally by the partners, unless otherwise stated in the partnership agreement.
- 7. Chapter 12-7 Should specify relationships among the partners: 1. Names and capital contributions of partners. 2. Rights and duties of partners. 3. Basis for sharing net income or net loss. 4. Provision for withdrawals of assets. 5. Procedures for submitting disputes to arbitration. 6. Procedures for the withdrawal or addition of a partner. 7. Rights and duties of surviving partners in the event of a partner’s death. Partnership Agreement LO 1 Identify the characteristics of the partnership form of business organization.
- 8. Chapter 12-8 When a partner invests noncash assets in a partnership, the assets should be recorded at their: a. book value. b. carrying value. c. fair market value. d. original cost. Question Forming a Partnership LO 2 Explain the accounting entries for the formation of a partnership.
Editor's Notes
- Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation. Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt. Actual Return on Plan Assets - Increase in pension funds from interest, dividends, and realized and unrealized changes in the fair market value of the plan assets. Amortization of Unrecognized Prior Service Cost - The cost of providing retroactive benefits is allocated to pension expense in the future, specifically to the remaining service-years of the affected employees. Gain or Loss - Volatility in pension expense can be caused by sudden and large changes in the market value of plan assets and by changes in the projected benefit obligation. Two items comprise the gain or loss: difference between the actual return and the expected return on plan assets and, amortization of the unrecognized net gain or loss from previous periods