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Partnership

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CHAPTER 15

Accounting for Partnerships

CHAPTER OUTLINE
Partnership Accounting Partners’ Accounts Ownership Changes Partnership Liquidation Instalment Liquidation Plan of Cash Distribution to Partners Summary Review and Multiple Choice Questions, Case, and Problems

LEARNING OBJECTIVES
After studying this chapter, you should be able to do the following: • Describe the advantages and disadvantages of the partnership form of organization. • Explain where the major differences lie in the accounting for corporations and partnerships. • Apply the three accounting methods available to record the admission of a new partner, and evaluate the strengths and weaknesses of each method. • Apply the accounting methods for the recording of the retirement of a partner. • Prepare the journal entries to record the liquidation of a partnership when a cash payment to partners is made only after the sale of all of the partnership assets. • Prepare a schedule of the liquidation of a partnership where instalment payments to partners are made as cash becomes available. • Prepare a cash distribution plan prior to the commencement of the partnership liquidation.

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CHAPTER 15 ACCOUNTING FOR PARTNERSHIPS

This chapter will examine the accounting practices involved in the partnership form of business organization. The major differences between corporations and partnerships appear in the equity section of the balance sheet. The accounting principles involved have been in use for many years; they are a prime example of principles that are not the subject of professional pronouncements, but rather are generally accepted by virtue of their use by similar organizations over time. Before discussing the accounting for partnerships, we will briefly describe this form of organization and some of its advantages and disadvantages. All of the common law provinces in Canada have...

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