PARTNERSHIP FORMULA & NOTES

Question 1

Partnership

Answer 1

Is an organization where two or more persons bind themselves to contribute money, property, or industry into a common fund with the intention of dividing the profits among themselves.

Question 2

Elements of a Partnership

Answer 2

1. There must be a valid contract (written or oral)
2. Must be put up by persons having legal capacity to contract
3. Contributions must be in the form of money, property or industry
4. The purpose of the business is to divide profit among themselves

Question 3

Mutual Contribution

Answer 3

There cannot be a partnership without contribution of money, property or industry

Question 4

Co-ownership of Contributed Assets

Answer 4

All assets contributed to the partnership are owned by the partnership by the virtue of its separate and distinct juridical personality

Question 5

Legal Entity

Answer 5

It has a juridical personality separate and distinct from the partners

Question 6

Mutual Agency

Answer 6

Any partner can bind the other partners to a contract if he is acting within his express or implied authority.

Question 7

Division of Profits or Losses

Answer 7

The essence of partnership is that each partner must share in the profits or losses of the venture

Question 8

Taxable Entity

Answer 8

The income of an ordinary partnership is taxable like e corporation at a rate of 30%

XPT: General Professional Partnership are exempted from tax

Question 9

Limited Life

Answer 9

It cane easily be dissolved or terminated with the mere
✔️withdrawal
✔️incapacity or death of a partner
✔️admission of a new partner
✔️expiration of the term specified in the contract

Question 10

Unlimited Liability

Answer 10

All partners (except Limited), including industrial partners, are personally liable for all debts incurred by the partnership.

*If the partnership cannot settle its obligations, creditors claims will be satisfied from the personal assets of the partners without prejudice to the rights of the separate creditors of the partners.

Question 11

General Partnership

Answer 11

All partners are liable to the extent of their separate properties

Question 12

Limited Partnership

Answer 12

It is composed of at least 1 general partner with others as limited partners who are liable to the partnership creditors only to the extent of their investment in the partnership

Question 13

Universal Partnership of Property

Answer 13

It is one where the partners contribute all their properties into a common fund

Question 14

Universal Partnership of Profits

Answer 14

Is it one where the partners contribute what they will receive as a result of their work or service rendered during the lifetime of the partnership. The partners retain ownership over their present or future property.

Question 15

General Partner

Answer 15

One who manages the partnership, contributes property or industry and has unlimited liability.

Question 16

Limited Partner

Answer 16

Is one who invests cash or property and is liable only to the extent of his capital contribution. He is not allowed to contribute industry or service only.

Question 17

Capitalist Partner

Answer 17

Is one who contributes money or property into the partnership fund

Question 18

Industrial Partner

Answer 18

Is one who contributes industry or service only

Question 19

Real Partner

Answer 19

One who is an actual partner

Question 20

Nominal Partner

Answer 20

Partner in name only

Question 21

Ostensible Partner

Answer 21

Is one who is known to the public that he is a partner

Question 22

Secret Partner

Answer 22

One who is not known as such to the public

Question 23

Universal Partner

Answer 23

Is one whose participation extends to the entire business

Question 24

Particular Partner

Answer 24

Is one whose participation is limited to a unit or part of a business

Question 25

Increase in Partner’s Capital Account (CREDITED)

Answer 25

1. Original Investment
2. Additional investment
3. Credit balance of the drawing account at the end of the period

Question 26

Decrease in Partner’s Capital Account (DEBITED)

Answer 26

1. Permanent withdrawals

2. Debit balance of the drawing account at the end of the period

Question 27

Partner’s Drawing Account

Answer 27

1. Credited for share in profits (this may be credited directly to capital)
2. Debited for temporary withdrawals and share in loss (may be debited directly to capital)

Question 28

Loan Receivable (of the partnership)

Answer 28

If a partner withdraws a substantial amount of money with the intention if repaying it

Question 29

Loan Payable (of the partnership)

Answer 29

A partner may lend amounts to the partnership in excess of his intended permanent investment.

Question 30

Non-cash Asset Valuation

Answer 30

1. Based on agreement
2. Fair market value
3. Book Value

*When property is subsequently sold after hours/days/weeks after formation = indicates the FV of the asset

Question 31

Main accounting issues

Answer 31

1. Valuation of contribution

2. Re-alignment of Capital (TCC vs. TAC)

Question 32

Inventory Valuation

Answer 32

1. Agreed Value
2. Fait Value
3. LCNRV

Question 33

Liquidation

Answer 33

1. Creditors other than partners
2. owing to partners other than capital and profits
3. owing to partners in respect of capital
4. partners in respect of profits

Question 34

Mortgage

Answer 34

if assumed by partnership deduct na sa pag compute ng capital.

if hindi inassume eh di add pa din sa capital

Question 35

adj cap

Answer 35

unadj cap
add/deduct adjustments
______________________
Adj cap

Question 36

get additional cash to invest

Answer 36

adj cap divide by p/l% to get the total agreed cap (TAC) then multiply by each p/l% = partner’s agreed cap