This document discusses partnerships, including:
1) The definition, characteristics, advantages, and disadvantages of partnerships. It also covers the classification of partnerships based on various factors like contribution, liability, duration, and legality.
2) The steps required to register a partnership business, including requirements to register with regulatory agencies and obtain necessary permits.
3) Key components of a partnership contract and articles of co-partnership, including details about the partners, business purpose, capital contributions, and other terms.
4) Accounting treatments for partnerships, including opening entries, owner's equity accounts, and different methods for dividing profits and losses among partners.
This document discusses partnerships, including:
1) The definition, characteristics, advantages, and disadvantages of partnerships. It also covers the classification of partnerships based on various factors like contribution, liability, duration, and legality.
2) The steps required to register a partnership business, including requirements to register with regulatory agencies and obtain necessary permits.
3) Key components of a partnership contract and articles of co-partnership, including details about the partners, business purpose, capital contributions, and other terms.
4) Accounting treatments for partnerships, including opening entries, owner's equity accounts, and different methods for dividing profits and losses among partners.
This document discusses partnerships, including:
1) The definition, characteristics, advantages, and disadvantages of partnerships. It also covers the classification of partnerships based on various factors like contribution, liability, duration, and legality.
2) The steps required to register a partnership business, including requirements to register with regulatory agencies and obtain necessary permits.
3) Key components of a partnership contract and articles of co-partnership, including details about the partners, business purpose, capital contributions, and other terms.
4) Accounting treatments for partnerships, including opening entries, owner's equity accounts, and different methods for dividing profits and losses among partners.
This document discusses partnerships, including:
1) The definition, characteristics, advantages, and disadvantages of partnerships. It also covers the classification of partnerships based on various factors like contribution, liability, duration, and legality.
2) The steps required to register a partnership business, including requirements to register with regulatory agencies and obtain necessary permits.
3) Key components of a partnership contract and articles of co-partnership, including details about the partners, business purpose, capital contributions, and other terms.
4) Accounting treatments for partnerships, including opening entries, owner's equity accounts, and different methods for dividing profits and losses among partners.
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AC 1104: PARTNERSHIP AND CORPORATION
CHAPTER 1: PARTNERSHIP b. Ostensible/by Estoppel
FORMATION VI. As to Publicity Definition of Partnership a. Secret 1. Art. 1767, Civil Code of the Phils. b. Open or Notorious 2. Uniform Partnership Act, Section 6 3. Eastman vs Clark, 52 N.H. 276, 16 Am. VII. As to Purpose Rep. 192 a. Commercial 4. Mechem, Elements of the Law of b. GPPs Partnership 5. Words and Phrases, 1957 Ed., page 291- VIII. As to Nature of Business 293 a. Trading b. Non-trading General Professional Partnership (GPP) Classification of Partners I. Profession II. Exercise of a Profession I. As to Contribution a. Capitalist Characteristics of a Partnership b. Industrial 1. Mutual Contribution c. Capitalist-Industrial 2. Division of Profits or Losses II. As to Liability 3. Mutual Agency a. General 4. Co-Ownership of Contributed Assets b. Limited 5. Limited Life III. Other Classifications 6. Partner’s Equity Accounts a. Nominal 7. Income Taxes b. Secret c. Silent Advantages d. Dormant I. Over Sole Proprietorships e. Managing II. Over Corporations f. Liquidating
Disadvantages Steps to Register a Partnership Business
I. Over Sole Proprietorships 1. Register the business in the Securities
II. Over Corporations and Exchange Commission (SEC) 2. Get a Barangay Clearance Classification of Partnership 3. Register the business and employees in I. As to Object Social Security System (SSS) a. Particular 4. Obtain a Business or Mayor’s Permit b. Universal 5. Register the business with the Bureau of - All present property Internal Revenue (BIR) - Profits Partnership Contract
II. As to Liability of the partners There is a need for a partnership contract to be
a. General in writing when: b. Limited a. Capital of the partnership is P3,000 or more in money or property III. As to Duration b. Immovable property or real rights are a. Partnership at will contributed into the partnership b. Partnership with a fixed term The same shall also appear in the public IV. As to Legality of its Existence instrument to be recovered in the SEC. a. De jure Articles of Co-Partnership b. De facto a. Partnership name V. As to Representation to Others a. Ordinary or Real b. Names, nationalities, and residences of the b. Fair Market Value – estimated amount a partners (indicate if general or limited if willing seller would receive from a limited partnership) capable buyer for the sale of the asset in c. Principal office of the partnership a free market d. Purpose of the partnership Opening Entries of a Partnership upon e. Duration of the partnership (term of Formation existence) f. Capital of the Partnership I. Individuals with no existing business g. Transfer clause form a partnership h. Undertaking to change partnership name a. Record investment of each partner in i. Other provisions, conditions, terms, and the partnership books stipulations j. Signatures of the partners II. A sole proprietor and another individual k. Notarial Page forming a partnership a. Adjust the sole proprietor’s books Partnership Taxation b. Close the books of the sole - GPPs are exempt from income of tax proprietor - Co-partnership subject to 25% c. Record the opening entries in the - Partner’s share in GPP is subject to new partnership books 10% tax - Dividend tax of 10% in co- III. Two sole proprietorships forming a partnership partnership - GPP individual income is subject to a. Adjust each proprietor’s capital individual income tax accounts in accordance with the - Co-partnership individual partners are agreement not subject to individual income tax b. Close the books c. Record the investment of each CHAPTER 1.1: ACCOUNTING FOR partner PARTNERSHIP CHAPTER 2: PARTNERSHIP Owner’s Equity Accounts OPERATIONS - Credited for initial and additional net Divisions of Profits and Losses investments (credit balance) - Debited for permanent withdrawals If no agreement is made, profits and losses are (debit balance) divided according to original capital contributions. Loans to/from Partners I. Equally - If a partner withdraws a substantial amount of money with the intention II. In unequal/arbitrary ratio of repaying it, the debit should be to a. Multiply profit by ratio Loans Receivable-Partner. b. Record the product according to - A partner may lend amounts to the each partner partnership more than his intended permanent investment, credited to Division of P/L in the Ratio of Partners’ Capital Loans Payable-Partner Account Balances - In case of liquidation loans payable to III. Ratio of Original Capital Balances partners must be paid after the claims a. Profit x original investment/total of outside creditors have been paid in capital investment of all partners full - These loans have priority over IV. Ratio of Beginning Capital Balances partners equity. (is the same with ratio of original CHAPTER 1.2 PARTNERSHIP capital balances but will differ after FORMATION next accounting period since the beginning capital balance refers to Valuation of Investments by Partners beginning capital of partner in the a. Agreed value (upon agreement of accounting period) partners) a. Profit x capital balance at end of Balance divided equally [(350,000)-228750]=121250 60,625 60,625 121,250 the period/total ending capital balance of all partners Partners’ Share in Profits 225,450 124,550 350,000 IX. Net profit before allowances for V. Ratio of Average Capital Balances salaries and interest but after a. Calculate capital account balance deduction of the bonus x year unchanged = average capital balances Net profit before salaries, interest, and Ex. bonus 300,000 =125% Net profit after bonus Capital Portion of the (300,000/125%) 280,000 =100% Date Account year Bonus 70,000 =25% Balance unchanged Jan. 1 100,000 3/12 a. Follow standard procedure after Apr. 1 190,000 6/12 getting the bonus by adding Oct. 1 150,000 3/12 bonus
b. Add average capital balances of X. Net profit after allowances for
each partner for total average salaries and interest but before bonus capital balances c. Profit x average capital balance Net profit before salaries, of partner/total ave. capital 350,000 interest, and bonus balance (Salaries) 100,000 (Interest) 41,250 141,250 VI. Interest allowed on Partners’ Capital Net profit before bonus 208,750 with Remaining Profit and Loss Bonus percentage 25% Divided in an Agreed Ratio Bonus 52,188 a. Multiply interest with capital b. Add total interest a. Follow standard procedure by c. Subtract total interest from net adding bonus as subtrahend profit = remainder from profit to calculate d. Remainder divided equally (or remainder according to agreement) = b. Share profits partner’s share in profit/loss e. Subtract/add share from capital XI. Net profit after allowances for salaries, interest, and bonus VII. Salary Allowance to Partners with Net profit before salaries, Remaining Net Profit or Loss interest, and bonus 350,000 Divided in an Agreed Ratio a. Add salary allowance to get total (Salaries) 100,000 salaries allowance (Interest) 41,250 141,250 b. Remainder = profit – total Net profit before bonus 208,750 =125% salaries allowance c. Divide remainder according to Net profit after bonus 167,000 =100% agreement Bonus 41,750 =25% Bonus to Managing Partners Based on Net Profit a. Follow standard procedure by adding bonus as subtrahend VIII. Net profit before allowances for from profit to calculate salaries, interest, and bonus remainder b. Share profits Gomez Cando Total Bonus x Profit 87,500 - 87,500 Salaries Allowance 60,000 40,000 100,000 Interest on Ave. capital balances 17,325 23,925 41,250