This document discusses accounting for partnership formation. It covers the capital structure of a partnership, including each partner having individual capital, drawing, receivable, and payable accounts. It provides an example of three partners - Bon Hok, Dyon Ok, and Meow Meng - forming a partnership by contributing cash and assets. The contributions and ownership percentages are listed. Journal entries are prepared for various partnership transactions, including partner contributions, withdrawals, purchases/payments, borrowings, and profit distributions. Finally, it briefly outlines three cases for partnership formation: two or more individuals forming a partnership, a sole proprietorship partnering with an individual, and two sole proprietorships forming a partnership.

1. Accounting
for
Partnership
Formation
D R . L E N Y R . B A R R O G A , C PA
A C C TG . 3 – C A N S Y 2 0 21 - 2 0 2 2

2. Capital Structure of a Partnership
Each Partner has an individual Partner’s Capital Account
Each Partner has an individual Partner’s Drawing account.
Each Partner has an individual Receivable Account
Each Partner has an individual Payable Account

3. Partner’s Equity Account
Partner's, Capital
Debit Credit
1.Permanent withdrawals
1. Original Investment/
contribution
2. Debit Balance in the drawing
account at the end of the period
2. Additional Investment
3. Credit Balance in the drawing
account at the end of the period

4. Partner’s Drawing Account
Partner's, Drawing
Debit Credit
1. Temporary withdrawals
2. Share in partnership losses 1. Share in partnership profits

5. Receivable from Partners Account
Receivable from Partner
Debit Credit
1.Borrowings from partnership
1. Partner pay its account to the
partnership
2, Sales on account to partners

6. Payable to Partner’s Account
Payable to Partner Account
Debit Credit
1.Partnership payment to Partner 1. Partner lend money to the
partnership

7. On January 1, 2022, Bon Hok, Dyon Ok and Meow Meng
agreed to form a partnership with the following contribution:
Bon Hok, a general partner, contributed cash P 150,000 and shares 45% for
profits and losses.
Dyon OK is a limited partner, contributed his Brand New Motorcycle
costing P 150,000 and shares 40% for profits and losses
Meow Meng is an industrial partner contributing his personal
services and shares 15% in the partnership profits.
Prepare the journal entry and post it to the appropriate partner’s account.

8. Let’s try these:
Prepare the journal entries for the following transactions:
January-1- Mr. Bon Hok withdraw P20,000 cash charge to share in profits.
2 - Mr. Ok made an additional contribution of P30,000 cash.
3 Mr. Meng bought goods on account from the partnership, P 10,000
4 The partnership borrowed P50,000 from Mr. Hok.
5 Mr. Meng fully paid its account to the partnership.
6. The partnership pays 50% of its borrowings to Mr. Hok.
7 Mr. Ok permanently withdraw P 20,000 cash from the partnership.
8. Assuming at the end of the accounting period, the partnership earns profit of P80,000 and
decided to distribute the profits to the partners.

9. There are several cases for
Partnership Formation
Case 1 – Two or more individual partners agreed to contribute money,
property or industry.
Case 2 A single proprietorship business and another individual forms a
partnership.
Case 3 Two or more Single proprietorship form of a business, form a
partnership.

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