1. Chapter 10 Accounting for Partnership 合伙企业会计

2. Organizing a Partnership Partners can invest both assets and liabilities in the partnership. Assets and liabilities are recorded at an agreed- upon value, normally fair market value. Contributions increase the partner’s capital account. (additional investment) Withdrawals decrease the partner’s capital account.

3. Organizing a Partnership Drawing Cash or other assets withdrawn by a partner Payments from partnership funds of the personal debt Collections on behalf of the firm by a partner but retained by the partner personally Drawing Cash or other assets withdrawn by a partner Payments from partnership funds of the personal debt Collections on behalf of the firm by a partner but retained by the partner personally

4. Choosing a Business Form Many factors should be considered when choosing the proper business form.

5. Dividing Income or Loss In the absence of an agreement, the Uniform Partnership Act says that the income or loss is shared equally by the partners. Four frequently used methods to divide income or loss are: –A stated ratio –Salary allowances to the partners, with the remaining net income or loss divided in a fixed ratio –Interest allowances on partners’ capital balance the partners, wit the remaining net income or loss divided in a fixed ratio –Salary and interest allowances and any remainder in a fixed ratio. Let’s look at each of these methods!

6. Allocation on Stated Ratios Prepare the closing entry for Income Summary that will allocate the income to the partners based on their agreement. Greene and Red agree to a three-fourths, one-fourth allocation of partnership income and loss, respectively. For 2002, net income is $60,000.

7. Allocation on Stated Ratios Greene and Red agree to a three-fourths, one-fourth allocation of partnership income and loss, respectively. For 2002, net income is $60,000. Greene: $60,000 ( 3 / 4 ) = $45,000 Redd: $60,000 ( 1 / 4 ) = $15,000

8. Salaries to Partners, remainder in a fixed ratio Greene receives $15,000 and Red receives $10,000 as annual salaries. Any remaining balance of income or loss is allocated equally. Net income for 2002 is $60,000. Prepare the closing entry for Income Summary that will allocate the income to the partners based on their agreement.

9. Allocation on Services and Stated Ratios If the allowances exceed net income, the deficit would be allocated equally, just as the excess is in the example above.

10. Allocation on Services and Stated Ratios If the net income is 20000, the deficit would be allocated equally, just as the excess is in the example above.

11. Salaries to Partners, remainder in a fixed ratio Greene receives $15,000 and Red receives $10,000 as annual salaries. Any remaining balance of income or loss is allocated equally. Net income for 2002 is $60,000.

12. Interest to Partners, remainder in a fixed ratio Each partner is allowed an annual interest allowance of 5% on the beginning-of-year capital balance,Any remaining balance of income or loss is allocated equally. Green’s capital balance is $80,000 and Red’s capital balance is $40,000. Net income for 2002 is $60,000. Prepare the closing entry for Income Summary that will allocate the income to the partners based on their agreement.

13. Allocation on interest and Stated Ratios Greene: $80,000 *5% = $4,000 Redd: $40,000 *5% = $2,000

14. Interest to Partners, remainder in a fixed ratio Each partner is allowed an annual interest allowance of 5% on the beginning-of-year capital balance. Any remaining balance of income or loss is allocated equally. Green’s beginning capital balance is $80,000 and Red’s beginning capital balance is $40,000.Net income for 2002 is $60,000

15. Greene and Red’s partnership agreement contains the following information: Greene receives $15,000 and Red receives $10,000 as annual salaries. Each partner is allowed an annual interest allowance of 5% on the beginning-of-year capital balance. Green’s beginning capital balance is $80,000 and Red’s beginning capital balance is $40,000. Any remaining balance of income or loss is allocated equally. Net income for 2002 is $60,000. What amount of the net income will be allocated to each partner based on their agreement? Allocation on Salary and Interest allowances, Stated Ratios

16. If the allowances exceed net income, the deficit would be allocated equally, just as the excess is in the example above. Allocation on Salary and Interest allowances, Stated Ratios

17. If the net income is 30,000, the deficit would be allocated equally, just as the excess is in the example above.

18. Allocation on Salary, interest Allowances and Stated Ratios If there is a net loss 60,000

19. Partnership Financial Statements Although most partnership financial statements are very similar to those of a proprietorship, the Statement of Changes in Partners’ Equity is one exception.

20. Assignments :p256 problem 4 P237 Problem 3