acctba2
DESCRIPTION
Accounting PrinciplesTRANSCRIPT
ACCTBA2Partnership & Corporation Acctg
Presented by:Mr. Francis H. Villamin
DLSU – January 6, 2014
Acctba2
1. Course Syllabus2. Course Description3. Learning Plan4. Textbook and References5. Course Requirement6. Classroom and Department Policies7. Grading System
Introduction to Partnership as a Business Organization
Partnership is a contract whereby two or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession.
Characteristics of a Partnership
Based on contract – Partnership is formed through the mutual agreement of all the partners. The contract may be oral or written.
Voluntary association – No partner should be forced or coerced in joining a partnership.
Mutual agency – Any partner may act as agent of a partnership in conducting its business.
Unlimited liability – The personal assets of any partner may be used to satisfy the partnership creditors’ claims upon liquidation if partnership assets are not enough to settle the liabilities of external creditors.
Characteristics of a Partnership
Limited life – A partnership may be dissolved by action of the partners or by operation of law.
Mutual participation in profits – A partner has the right to share in the partnership profits.
Legal entity - A partnership has legal personality separate and distinct from that of each partners.
Co-ownership of contributed assets – Property contributed to the partnership are owned by the partnership by virtue of its separate legal personality.
Income tax – Partnerships, except general professional partnerships are subject to income tax.
Advantages of a Partnership
1. Ease and less cost to form and dissolve.
2. Broader source of capital.3. Relative freedom and flexibility in
decision-making. Decisions are effected simply by agreement among the partners without the formalities necessary under the corporation.
Advantages of a Partnership
4. Broader management base.5. Unlimited liability of general
partners makes it reliable from the point of view of creditors.
Disadvantages of a Partnership
1. Lack of business continuity because it can easily be dissolved.
2. Limited amount of capital may be raised as compared to a corporation.
3. Unlimited liability of a partnership.4. A general partner may be subjected to
personal liability for erroneous management decisions made by his associates.
Disadvantages of a Partnership
5. There is likelihood of dissension and disagreement when each of the partners has the same authority in the management of the firm.
6. There is difficulty in transferring ownership interest because ownership interest in the partnership cannot be transferred without the consent of all the partners.
Articles of Co-Partnership
This is an agreement in writing among the partners governing the nature and terms of the partnership contract.
A written agreement is required when the partnership capital is P3,000 or more in money or in property.
Articles of Co-Partnership
1. The name of the partnership.2. The names, addresses of the
partners, classes of partners stating whether the partner is a general or limited partner.
3. The effective date of the contract.4. The purpose and principal place of
business of the business.
Articles of Co-Partnership
5. The capital of the partnership stating the contribution of each of the partners.
6. The rights and duties of each of the partner.
7. The manner of dividing profit or loss among the partners.
8. The conditions under which the partners may withdraw money or other assets.
Articles of Co-Partnership
9. The manner of keeping the books of accounts.
10. The cause for dissolution and the provision for arbitration in settling disputes.
Kinds of Partners
As to nature of contribution 1. Capitalist partner – one who
contributes money, property into the partnership.
2. Industrial partner – one who contributes only his
industry or services to the partnership.
Kinds of Partners
As to liabilities to third parties 1. General partner – one whose liability
to partnership creditors extends to his personal assets.
2. Limited partner – one whose liability to partnership creditors is limited to his capital contribution.
Kinds of Partners
As to their interest in or obligation to the business
1. Managing partner – one who manages the affairs of the business.
2. Secret partner – one who is not known
by third parties to be a partner in the business but takes active part in
the business.
Kinds of Partners
As to their interest in or obligation to the business
3. Silent partner – one who does not take active part in the business but is known by third parties to be a partner in the
business. 4. Dormant partner – one who does not take part in the business and is not known by third
parties to be a partner. 5. Nominal partner – A partner in name only
and does not participate in the management of
business.
Kinds of Partners
As to their interest in or obligation to the business
5. Ostensible Partner – one who takes active part and known to the public as a partner in the partnership, whether or not he has an actual interest in the firm.
Kinds of Partners
As to their interest in or obligation to the business
6. Liquidating Partner – one who takes charge of the winding up of a partnership affairs upon dissolution.
Classifications of Partnership
As to liability to partners 1. General partnership – one in which all
partners are general partners. 2. Limited partnership – one which is
composed of one or more general partners and one or more limited partners. It shall bear the word “Limited” or “Ltd.” in its
firm name.
Classifications of Partnership
As to object of partnership 1. Universal partnership of all
present property – One in which the partners contribute all the property which actually belongs to them to a common fund, with the intention of dividing the same among themselves, as well as the profits which they may acquire therewith.
Classifications of Partnership
As to object of partnership 2. Universal partnership of profits -
One in which comprises all that the partners may acquire by their industry or work during the existence of the partnership.
Classifications of Partnership
As to object of partnership 3. Particular partnership – One which
has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation.
Classifications of Partnership
As to duration 1. Partnership at will – One in
which no time or period is specified for its existence and is not formed for a particular undertaking or venture. This may be terminated anytime by mutual agreement of the partners or by the will of any one partner alone.
Classifications of Partnership
As to duration 2. Partnership with a fixed
term – One in which the term for which the partnership will exist is fixed or agreed upon. This also applies to a partnership that is formed for a particular objective or undertaking.
Classifications of Partnership
As to purpose 1. Commercial or trading
partnership – one that is organized to undertake business transactions such as merchandising or manufacturing transactions.
Classifications of Partnership
As to purpose 2. Professional
partnership – one that is formed for the practice of a profession, such as accounting firm for CPAs, law firms for lawyers, and similar professions.
Classification of Partnerships
As to legality of existence.1. De jure partnership – one that
has complied with the legal requirements pertaining to its formation.
2. De facto partnership – one that has not complied with the legal requirements of the partnership.
Classification of Partnerships
As to publicity.1. Secret partnership – one wherein
the existence of certain persons as partners is not make known to the public by any of the partners.
2. Open partnership – one wherein the existence of certain persons as partners is made known to the public by the members of the firm.
Classification of Partnerships
As to publicity.1. Secret partnership – one wherein
the existence of certain persons as partners is not make known to the public by any of the partners.
2. Open partnership – one wherein the existence of certain persons as partners is made known to the public by the members of the firm.
Classification of Partnerships
As to representation to others.1. Ordinary partnership – one which
actually exists among the partners and also as to third parties.
2. Partnership by estoppel – one which in reality is not a partnership but is considered one only in relation to those who, by their conduct or omission are precluded to deny or disprove the partnership’s existence.
Basic Rights of a Partner
The right to share in the profits. The right to participate in the
management of the business. In the event of liquidation, the
right to share in the assets of the business after satisfying the claims of creditors.
Basic Features of Partnership Accounting
1. More than one capital and drawing accounts.
2. Partner’s Loans.3. Partner’s Borrowings.4. Interest on Investment.5. Division of Profits and Losses.
Accounting for Partnership Formation and Operating Transactions
1. Accounting for capital contributions a. Initial investment b. Additional capital contributions c. Drawings by partners2. Loan to and from partners
Ledger Accounts for Partners
Capital accounts Drawing accounts Accounts for loans to and from
partners
Partner’s Capital Account
Permanent reduction xxx
Initial investment xxx
Additional investment xxx
Partner’s Drawing Account
Share in the loss xxx
Regular withdrawals xxx
Share in the profits xxx
Partnership Formation
A. No existing business 1. Two or more persons will start a
business for the first time and form a partnership.
B. With existing business 2. Conversion of a single
proprietorship into a partnership.
Partnership Formation
B. With existing business 3. Two or more single proprietors
will combine their businesses and form a partnership.
4. An existing partnership will be dissolved in favor of a new partnership.
Thank you.That’s all for today!!