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Loan Receivable from a partner asset; not 3. Interest based on contributions made, residual
considered in determining partners equity profit in an agreed ratio
*first entries in the book of the partnership pertains 4. Salaries to partners for service rendered, residual
to the contributions profit based on contributions
Fair market value amount for which an asset 6. Interest on contributions, salaries to partners,
could be exchanged bonus to managing partner, and residual profit in
an agreed ratio. Where bonus is expressed as:
Service=memorandum entry
a. a distribution of profit (a certain percent of net
Goodwill an intangible asset representing ability income)
to generate earnings more than what is normal
b. an expense (a certain percent of net income after 2. Retirement / withdrawal (a) capital balance of
bonus) the retiring partner must be updated; (b) drawing
account of the retiring partner must also be closed
Bonus special compensation in recognition of the
against the capital account
partners ability; not applicable in net loss
3. Death or Incapacity of a partner -similar to the
Return on Partners Equity represents the ability of admission of partner by purchase
the business to earn adequate profits for the
partners; *Payable to Partners Estate
4. Incorporation using the partnership assets as its
100
starting capital
*Appropriation Account allocating gain or loss,
profits or losses, adjustments to the partners
Dissolution occurs when ownership changes; capital; to reduce computation
does not necessarily terminate the operation
*Liquidation is always preceded by dissolution
1. by acts of the partners / by mutual agreement
Delectus Personae consent of all continuing
2. by operation of law / by civil interdiction partners
3. by judicial decree / by commission of fraud Liquidation process of winding up the affairs of
the business towards its termination
1. Admission of partner cannot admit without the Partnership Liability (order of priority)
consent of all partners 1. Partnership liabilities (outside creditors)
a. by purchase 2. Partners Interest (other than their capital
-capital account is set up for the new partner; (a) balance) inside creditors
personal transaction between the existing partner 3. Partners Capital balance
and the new partner; (b) partnership asset will not
change; (c) total partners equity will not change 4. Share in profit
2. by installment
(a) schedule of safe payment
(b) cash priority program