CONVERSION OF PARTNERSHIP FIRM INTO LLPANMOL GULATI
-This document contains all the conceptual knowledge about: 1. partnership firm 2. LLP
- suitability/ unsuitability of both form of organisations
- benefits of LLP over firm
- Conversion process
- statutory compliances
Solution Manual Advanced Accounting Chapter 15 9th Edition by BakerSaskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
CONVERSION OF PARTNERSHIP FIRM INTO LLPANMOL GULATI
-This document contains all the conceptual knowledge about: 1. partnership firm 2. LLP
- suitability/ unsuitability of both form of organisations
- benefits of LLP over firm
- Conversion process
- statutory compliances
Solution Manual Advanced Accounting Chapter 15 9th Edition by BakerSaskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
Original air date: Dec. 14, 2017
Recording available at http://www.mhmcpa.com
Partnerships often hear the calling from private equity fund partners to monetize a portion of the value they own, even though they are not yet ready to deploy their exit strategy. Partnerships offer tremendous flexibility to accomplish this objective in a tax-efficient manner using debt-financed distributions. However, these transactions leave potential traps for the unwary.
In this webcast, we will provide comprehensive examples of the tax consequences of debt-financed distributions, from the moment they are made through typical subsequent events that affect their tax results.
Corporate Formation - Business Law & Order Event SeriesAnnArborSPARK
This presentation was given by Carrie Leahy of Bodman PLC, Russ Brown of R.D. Brown PLC and Jerry Grady of UHY Advisors.
When forming a business one of the first decisions an entrepreneur will make is choice of entity. This session will cover the possible legal structures for your business activities, including the advantages and disadvantages of each type of entity in terms of limited liability, management of the business, employee compensation and tax matters. Learn the basics of Corporate Formation and understand the pros and cons of incorporating in Michigan and Delaware.
its my first !
please #follow so that i will make more for all
it is according to class 12 syllabus ! hopefully it will weak students like me ! it contains all fundamentals of partnership firm.
it also usefull in xam times as revision notes!
for more just follow me !
fb@venuankush
class 12 / completeguide
How to Read a Balance Sheet - And Why You Care! (Series: MBA Boot Camp 2020) Financial Poise
A balance sheet provides a snapshot of a company’s assets, liabilities, and equity. It is one of several major financial statements used to manage a business, and is a critical due diligence item used by lenders and investors in deciding whether to provide capital to a business. This webinar explains the basics of understanding a balance sheet and puts it in context by also touching on the other key financial statements.
To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/how-to-read-a-balance-sheet-2020/
Understand the various legal forms of a business and the opportunities and challenges associated with each form
http://frombootstobusiness.com/category/from-boots-to-business/business-legal-principles/
Original air date: Dec. 14, 2017
Recording available at http://www.mhmcpa.com
Partnerships often hear the calling from private equity fund partners to monetize a portion of the value they own, even though they are not yet ready to deploy their exit strategy. Partnerships offer tremendous flexibility to accomplish this objective in a tax-efficient manner using debt-financed distributions. However, these transactions leave potential traps for the unwary.
In this webcast, we will provide comprehensive examples of the tax consequences of debt-financed distributions, from the moment they are made through typical subsequent events that affect their tax results.
Corporate Formation - Business Law & Order Event SeriesAnnArborSPARK
This presentation was given by Carrie Leahy of Bodman PLC, Russ Brown of R.D. Brown PLC and Jerry Grady of UHY Advisors.
When forming a business one of the first decisions an entrepreneur will make is choice of entity. This session will cover the possible legal structures for your business activities, including the advantages and disadvantages of each type of entity in terms of limited liability, management of the business, employee compensation and tax matters. Learn the basics of Corporate Formation and understand the pros and cons of incorporating in Michigan and Delaware.
its my first !
please #follow so that i will make more for all
it is according to class 12 syllabus ! hopefully it will weak students like me ! it contains all fundamentals of partnership firm.
it also usefull in xam times as revision notes!
for more just follow me !
fb@venuankush
class 12 / completeguide
How to Read a Balance Sheet - And Why You Care! (Series: MBA Boot Camp 2020) Financial Poise
A balance sheet provides a snapshot of a company’s assets, liabilities, and equity. It is one of several major financial statements used to manage a business, and is a critical due diligence item used by lenders and investors in deciding whether to provide capital to a business. This webinar explains the basics of understanding a balance sheet and puts it in context by also touching on the other key financial statements.
To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/how-to-read-a-balance-sheet-2020/
Understand the various legal forms of a business and the opportunities and challenges associated with each form
http://frombootstobusiness.com/category/from-boots-to-business/business-legal-principles/
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
Know more: https://www.synapseindia.com/technology/mean-stack-development-company.html
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Building Your Employer Brand with Social MediaLuanWise
Presented at The Global HR Summit, 6th June 2024
In this keynote, Luan Wise will provide invaluable insights to elevate your employer brand on social media platforms including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok. You'll learn how compelling content can authentically showcase your company culture, values, and employee experiences to support your talent acquisition and retention objectives. Additionally, you'll understand the power of employee advocacy to amplify reach and engagement – helping to position your organization as an employer of choice in today's competitive talent landscape.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Buy Verified PayPal Account | Buy Google 5 Star Reviewsusawebmarket
Buy Verified PayPal Account
Looking to buy verified PayPal accounts? Discover 7 expert tips for safely purchasing a verified PayPal account in 2024. Ensure security and reliability for your transactions.
PayPal Services Features-
🟢 Email Access
🟢 Bank Added
🟢 Card Verified
🟢 Full SSN Provided
🟢 Phone Number Access
🟢 Driving License Copy
🟢 Fasted Delivery
Client Satisfaction is Our First priority. Our services is very appropriate to buy. We assume that the first-rate way to purchase our offerings is to order on the website. If you have any worry in our cooperation usually You can order us on Skype or Telegram.
24/7 Hours Reply/Please Contact
usawebmarketEmail: support@usawebmarket.com
Skype: usawebmarket
Telegram: @usawebmarket
WhatsApp: +1(218) 203-5951
USA WEB MARKET is the Best Verified PayPal, Payoneer, Cash App, Skrill, Neteller, Stripe Account and SEO, SMM Service provider.100%Satisfection granted.100% replacement Granted.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Event Report - SAP Sapphire 2024 Orlando - lots of innovation and old challengesHolger Mueller
Holger Mueller of Constellation Research shares his key takeaways from SAP's Sapphire confernece, held in Orlando, June 3rd till 5th 2024, in the Orange Convention Center.
B2B payments are rapidly changing. Find out the 5 key questions you need to be asking yourself to be sure you are mastering B2B payments today. Learn more at www.BlueSnap.com.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
VAT Registration Outlined In UAE: Benefits and Requirementsuae taxgpt
Vat Registration is a legal obligation for businesses meeting the threshold requirement, helping companies avoid fines and ramifications. Contact now!
https://viralsocialtrends.com/vat-registration-outlined-in-uae/
Recruiting in the Digital Age: A Social Media MasterclassLuanWise
In this masterclass, presented at the Global HR Summit on 5th June 2024, Luan Wise explored the essential features of social media platforms that support talent acquisition, including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
2. 15-2
Partnerships
• The number of partnerships in the United
States has been estimated to be between
1.5 and 2.0 million, second only to sole
proprietorships, which number in excess
of 15 million businesses.
• In contrast, there are about 1 million
corporations in the United States.
3. 15-3
Partnerships
• Partnerships are a popular form of business
because they are easy to form and because
they allow several individuals to combine
their talents and skills in a particular business
venture.
• In addition, partnerships provide a means of
obtaining more equity capital than a single
individual can obtain and allow the sharing of
risks for rapidly growing businesses.
4. 15-4
Partnerships
• Accounting for partnerships requires
recognition of several important factors.
• First, from an accounting viewpoint, the
partnership is a separate business entity.
• The Internal Revenue Code, however, views the
partnership form as a conduit only, not separable
from the business interests of the individual
partners.
5. 15-5
Partnerships
• Second, although many partnerships account
for their operations using accrual accounting,
some partnerships use the cash basis or
modified cash basis of accounting.
• These alternatives are allowed because the
partnership records are maintained for the
partners and must reflect their information
needs.
6. 15-6
Partnerships
• The partnership’s financial statements are
usually prepared only for the partners, but
occasionally for the partnership’s creditors.
• Unlike publicly traded corporations, most
partnerships are not required to have annual
audits of their financial statements.
7. 15-7
Partnerships
• Although many partnerships adhere to generally
accepted accounting principles (GAAP),
deviations from GAAP are found in practice.
• The specific needs of the partners should be the
primary criteria for determining the accounting
policies to be used for a specific partnership.
8. 15-8
Formation of a Partnership
• The agreement to form a partnership may be as
informal as a handshake or as formal as a many
paged partnership agreement .
• Each partner must agree to the formation
agreement, and partners are strongly advised
to have a formal written agreement in order to
avoid potential problems that may arise during
the operation of the business.
9. 15-9
Partnership Formation
• At the formation of a partnership, it is necessary
to assign a proper value to the non-cash assets
and liabilities contributed by partners.
• An item contributed by a partner becomes
partnership property.
10. 15-10
Partnership Formation
• The partnership must clearly distinguish
between capital contributions and loans
made to the partnership by individual
partners.
• Loan arrangements should be evidenced by
promissory notes or other legal documents
necessary to show that a loan arrangement
exists between the partnership and an
individual partner.
11. 15-11
Partnership Formation
• The contributed assets should be valued at
their fair values, which may require appraisals
or other valuation techniques.
• Liabilities assumed by the partnership should
be valued at the present value of the remaining
cash flows.
12. 15-12
Partnership Formation
• The individual partners must agree to the
percentage of equity that each will have in the
net assets of the partnership.
• Generally, the capital balance is determined by
the proportionate share of each partner’s capital
contribution.
• For example, if A contributes 70 percent of the
net assets in a partnership with B, then A will
have a 70 percent capital share and B will have
a 30 percent capital share.
13. 15-13
Partnership Formation
• In recognition of intangible factors, such as a
partner’s special expertise or necessary
business connections, however, partners may
agree to any proportional division of capital.
• Therefore, before recording the initial capital
contribution, all partners must agree on the
valuation of the net assets and on each
partner’s capital share.
14. 15-14
Limited Partnerships
• Many persons view the possibility of personal
liability for a partnership’s obligations as a major
disadvantage of the general partnership form of
business. For this reason, sometimes people
become limited partners in one of the several
limited partnership forms listed on the next slide:
15. 15-15
Limited Partnerships
• Limited Partnership (LP): In a LP, there is at
least one general partner and one or more
limited partners.
• Limited Liability Partnerships (LLP): A LLP is one
which each partner has some degree of liability
shield
• Limited Liability Limited Partnership (LLLP): In
most states, a limited partnership may elect to
become a limited liability limited partnership.
16. 15-16
Key Observations
• Note that the partnership is an accounting entity
separate from each of the partners and that the
assets and liabilities are recorded at their market
values at the time of contribution.
• No accumulated depreciation is carried forward
from the sole proprietorship to the partnership.
• All liabilities are recognized and recorded.
17. 15-17
Key Observations
• The key point is that the partners may allocate
the capital contributions in any manner they
desire.
• The accountant must be sure that all partners
agree to the allocation and must then record it
accordingly.
18. 15-18
Partner’s Accounts
• The partnership may maintain several accounts
for each partner in its accounting records.
• These partner’s accounts are as follows:
• Capital Accounts.
• Drawing Accounts.
• Loan Accounts.
19. 15-19
Capital Accounts
• The initial investment of a partner, any
subsequent capital contributions, profit or
loss distributions, and any withdrawals of
capital by the partner are ultimately recorded
in the partner’s capital account.
• The balance in the capital account represents
the partner’s share of the net assets of the
partnership.
20. 15-20
Capital Accounts
• Each partner has one capital account, which
usually has a credit balance.
• On occasion, a partner’s capital account may
have a debit balance, called a deficiency or
sometimes termed a deficit, which occurs
because the partner’s share of losses and
withdrawals exceeds his or her capital
contribution and share of profits.
• A deficiency is usually eliminated by additional
capital contributions.
21. 15-21
Drawing Accounts
• Partners generally make withdrawals of
assets from the partnership during the
year in anticipation of profits.
• A separate drawing account often is used to
record the periodic withdrawals and is then
closed to the partner’s capital account at
the end of the period. For example:
Blue, Drawing $$$
Cash $$$
22. 15-22
Drawing Accounts
• Noncash drawings should be valued at their fair
market values (FMV)—not book value (BV)—at
the date of the withdrawal. For example:
Blue, Drawing FMV
Auto BV
Gain Difference*
*That is, FMV less BV
23. 15-23
Drawing Accounts
• A few partnerships make an exception to the rule
of market value for withdrawals of inventory by
the partners.
• They record withdrawal of inventory at cost,
thereby not recording a gain or loss on these
drawings.
24. 15-24
Loan Accounts
• The partnership may look to its present partners
for additional financing.
• Any loans between a partner and the
partnership should always be accompanied by
proper loan documentation such as promissory
note.
• A loan from a partner is shown as a payable on
the partnership’s books, the same as any other
loan.
25. 15-25
Loan Accounts
• Unless all partners agree otherwise, the
partnership is obligated to pay interest on the
loan to the individual partner.
• Note that interest is not required to be paid on
capital investments unless the partnership
agreement states that capital interest is to be
paid.
• Interest on loans is recorded as an operating
expense by the partnership.
26. 15-26
Loan Accounts
• Alternatively, the partnership may lend money
to a partner, in which case it records a loan
receivable from the partner.
• Again, unless it is otherwise agreed by all
partners, these loans should bear interest and
the interest income is recognized on the
partnership’s income statement.
27. 15-27
Loan Accounts
• A loan to/from a partner is a related-party
transaction for which separate footnote
disclosure is required, and it must be reported
as a separate balance sheet item, not included
with other liabilities.
28. 15-28
Allocating Profit or Loss
• Profit or loss is allocated to the partners at
the end of each period in accordance with
the partnership agreement.
• If no partnership agreement exists, profits and
losses are to be shared equally by all
partners.
29. 15-29
Allocating Profit or Loss
• A wide range of profit distribution plans is found
in the business world.
• Some partnerships have straightforward
distribution plans, while others have extremely
complex ones.
• It is the accountant’s responsibility to distribute
the profit or loss according to the partnership
agreement regardless of how simple or complex
that agreement is.
30. 15-30
Allocating Profit or Loss
• Profit distributions are similar to dividends
for a corporation: these distributions are not
included in the partnership’s income statement,
regardless of how profit is distributed.
• Stated otherwise, profit distributions are
recorded directly into the partner’s capital
accounts, not as expense items.
31. 15-31
Allocating Profit or Loss
• Most partnerships use one or more
of the following distribution methods:
• Preselected ratio.
• Interest on capital balances.
• Salaries to partners.
• Bonuses to partners.
32. 15-32
Preselected Ratio
• Preselected ratios are usually the result of
negotiations between the partners.
• Ratios for profit distributions may be based
on the percentage of total partnership capital,
time and effort invested in the partnership, or
a variety of other factors.
• Some partnerships have different ratios if the
firm suffers a loss versus earns a profit.
33. 15-33
Interest on Capital Balances
• Distributing partnership income based on
interest on capital balances recognizes the
contribution of the partners’ capital investments
to the profit-generating capacity of the
partnership.
• This interest on capital is not an expense of the
partnership; it is a distribution of profits.
34. 15-34
Salaries to Partners
• Section 401 of the UPA 1997 states that a
partner is not entitled to compensation for
services performed for the partnership except for
reasonable compensation for services in winding
up the business of the partnership.
35. 15-35
Salaries to Partners
• If one or more of the partners’ services are
important to the partnership, the profit
distribution agreement may provide for salaries
or bonuses.
• Again, these salaries paid to partners are a form
of profit distribution and are not an expense of
the partnership.
36. 15-36
Bonuses to Partners
• Occasionally, the distribution process may
depend on the size of the profit or may differ
if the partnership has a loss for the period.
• For example, salaries to partners might be
paid only if revenue exceeds expenses by a
certain amount.
• The accountant must carefully read the
partnership agreement to determine the precise
profit distribution plan for the specific
circumstances at the time.
37. 15-37
Allocating Profit or Loss
• The profit or loss distribution is recorded with a
closing entry at the end of each period.
• The revenue and expenses are closed into an
income summary account or directly into the
partners’ capital accounts.
• In addition, the drawing accounts are closed to
the capital accounts at the end of the period.
• An example is provided on the next two slides.
38. 15-38
Example: Allocating Profit or Loss
• NOTE: All amounts assumed.
• Blue, Capital $4,000
Blue, Drawing $4,000
Close Blue’s drawing account.
• Revenue $45,000
Expenses $35,000
Income Summary $10,000
Close revenue and expenses (assuming
revenue > expenses).
39. 15-39
Example: Allocating Profit or Loss
• Income Summary $10,000
Alt, Capital $6,000
Blue, Capital $4,000
Distribute profit in accordance with partnership
agreement (assuming 6:4 P/L ratio).
40. 15-40
Partnership Financial Statements
• A partnership is a separate reporting entity for
accounting purposes, and the three financial
statements - income statement, balance sheet,
and statement of cash flows– typically are
prepared for the partnership at the end of
each reporting period.
• In addition to the three basic financial
statements, a statement of partners’ capital
is usually prepared to present the changes on
the partners’ capital accounts for the period.
41. 15-41
Changes in Membership
• Changes in the membership of a partnership
occur with the addition of new partners or
dissociation of present partners.
• New partners are often a primary source of
additional capital or needed business expertise.
• The legal structure of a partnership requires the
admission of a new partner to be subject to the
unanimous approval of the present partners.
42. 15-42
Changes in Membership
• Section 306 of the UPA 1997 states that a
person admitted as a new partner of an existing
partnership is not personally liable for any
partnership obligations incurred before the new
partner was admitted.
• The retirement or withdrawal of a partner from a
partnership is a dissociation of that partner.
43. 15-43
Changes in Membership
• A new partner may be admitted by:
• Acquiring part of an existing partner’s
interest directly in a private transaction
with a selling partner.
• Investing additional capital in the
partnership.
44. 15-44
New Partner Purchases an Interest
• An individual may acquire a partnership
interest directly from one or more of the
present partners.
• In this type of transaction, cash or other
assets are exchanged outside the partner-
ship, and the only entry necessary on the
partnership’s books is a reclassification of
the total capital of the partnership.
45. 15-45
New Partner Purchases an Interest
• The partnership’s accountant should ensure that
sufficient evidence exists for any revaluation in
order to prevent valuation abuses.
• Corroborating evidence such as appraisals or an
extended period of excess earnings help support
asset valuations.
46. 15-46
New Partner Invests in Partnership
• An investment less than the new partner’s
respective share indicates that the partnership’s
prior net assets are overvalued. The alternative
accounting treatment for this case are:
– Revalue net assets downward.
– Reduce previously recognized goodwill.
– Allocate capital bonus to new partner.
47. 15-47
New Partner Invests in Partnership
• The bonus method realigns partner’s capitals
among present and the new partner.
• Recognizing valuation increases in net assets or
goodwill was not GAAP, but sometimes done by
partnerships not following GAAP.
48. 15-48
New Partner Invests in Partnership
• Generally, an excess of investment over the
respective book value of the new partner interest
indicates that the partnership’s prior net assets
are undervalued or that the partnership has
some unrecorded goodwill. Three alternative
accounting treatments exist in this case:
• Revalue net assets upward.
• Record unrecognized goodwill.
• Allocate capital bonus to current partners.
49. 15-49
New Partner Invests in Partnership
• With respect to the three alternatives indicated in
the prior slide, the decision is usually a result of
negotiations between the prior partners and the
prospective partner.
50. 15-50
Dissociation of a Partner
• When a partner retires or withdraws from a
partnership. In most cases, the partnership
purchases the dissociated partner’s interest in
the partnership for a buyout price.
• Section 701 of UPA 1997 states that the buyout
price is the estimated amount if the net assets of
the partnership had been sold at a price equal to
the greater of the liquidation value or the value
based on a sale of the entire business as a
going concern without the dissociated partner.
51. 15-51
Dissociation of a Partner
• Goodwill may be included in the valuation.
• The partnership must pay interest to the
dissociated partner from the date of dissociation
to the date of settlement.
• In cases of wrongful dissociation, the partnership
may sue the withdrawing partner for damages
the wrongful dissociation causes the
partnership.
52. 15-52
Dissociation of a Partner
• In the case in which the partnership agrees to
the dissociation and it is not wrongful, the
accountant can aid in the computation of the
buyout price.
• The partnership agreement may include other
procedures to use in the case of a partner
dissociation.
53. 15-53
Dissociation of a Partner
• Some partnerships have an audit performed
when a change in partners is made. This audit
establishes the accuracy of the existence and
book values of the assets and liabilities.
• Generally, the existing partners buy out the
retiring partner’s interest.
54. 15-54
Dissociation of a Partner
• For example, assume that Alt retires from the ABC
Partnership when his capital account has a balance of
$55,000, after recording all increases in the partnership’s
net assets including income earned up to the date of
retirement. All partners agree to the $55,000 as the
buyout price of Alt’s partnership interest. The entry
made by the ABC Partnership is:
Alt, Capital $55,000
Cash $55,000
Retirement of Alt.
55. 15-55
Dissociation of a Partner
• Alt has a capital credit of $55,000 and all
partners agree to a buyout price of $65,000.
Most partnerships account for the $10,000
payment above Alt’s capital credit as a capital
adjustment bonus to Alt from the capital
accounts of the remaining partners.
56. 15-56
Dissociation of a Partner
• Sometimes, the buyout price is less than a
partner’s capital credit.
• For example, Alt agrees to accept $50,000 as
the buyout price for his partnership interest. If no
revaluations of the net assets is necessary, then
the $5,000 difference is distributed as a capital
adjustment to remaining partners based upon
their profit and loss ratio.
57. 15-57
Tax Aspects of a Partnership
• The Internal Revenue Service views the
partnership form of organization as a temporary
aggregation of the individual partners’ rights.
• The partnership is not a separate taxable entity.
• Therefore, the individual partners must report
their share of the partnership income or loss on
their personal tax returns, whether withdrawn or
not.