Partnership
-two or more persons bind themselves to contribute money, property or industry to a common fund with the intention of dividing profit amonth themselves
General Professional Partnership
-exercise of profession
Characteristics:
-Mutual Contributuon
-Division of Profit and Losses
-Co Ownership of Contributed Assets
-Mutual Agency
-Limited Life
-Unlimited Liabilty
-Income Taxes
-Partner's Equity Accounts
Classifications:
1. Accordibg to object
-Universal Partnership of all present propert
-Universal Partnership of profits
-Particular Partnership
2. According to Liability
-General
-Limited
3. According to duration
-fixed term
-at will
4. According to purpose
-commercial
-professional
5. According to legality
-De Jure
-De Facto
Kinds of Partners
-General
-Limited
-Capitalist
-Industrial
-Managing
-Liquidating
-Dormant
-Silent
-Secret
-Nominal
Fair Market Value
-estimated amount that a willing seller would receive from a financially capable buyer for the sale of the asset
Partnership may be formed:
1. Individuals with no existing business
2. Conversion of sole
3. Admission or retirement
Bonus
-allocation of profits to a partner on the basis of performance
Prior period errors
-are omissions from and other mistatements of the financial statements for one or more periods that are discovered in the current period
Profit and loss ratio
-ratio in which profits or losses from partnership operations are distributed
Allowances
-provisions for salaries and interest in the partnership agreement
Dissolution
-the partnership is not terminated
Liquidation
-winding up of the business; terminated
Causes of Dissolution
-admission of a partner
-withdrawal or retirement of a partner
-death of a partner
-incorporation
A person may become a partner by:
-purchase of interest from partners
-investment of asset
Realization
-conversion of non cash assets into cash
Right of offset
-legal right of a partner to apply part of all of his loan account balance against his capital deficiency
Methods of Partnership Liquidation
1. Lump Sum
-all non cash assets are realized and all liabilities are settled before the final cash distribution to the partners
2. Installment
-realization of non cash asset is accomplished over an extended period of time. Two types: a. Schedule of Safe Payments b. Cash Priority Program
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Credits to Sir Ballada :)
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