Chapter 8 Partnership accounting

2 Learning objectives of partnership accounting  Understand the meaning of partnership types and their characteristics  Understanding of partnership partnership account the characteristics of equity capital  Formed a partnership with a partner to master the accounting profit and loss distribution  Partner of the accounting changes to master  Understand the reasons for termination of a partnership, a partner familiar with the liquidation process

3 Section 1 the nature of the partnership  Characteristics of partnership  Easy to set up  Limited operating period  Inter-agency  Unlimited liability  Shared partnership assets and profits

4 Section 1 The nature of the partnership (continued) 1.partnership contract 2.nature of business 3.each partner's rights and obligations 4.each partner's original capital contribution 5.reduce capital requirements and capital increase 6.profit and loss allocation 7.the dissolution of a partnership program

5 Section 1 The nature of the partnership (continued)  Partnership users of financial reports Partner Creditor Tax authorities  The basic characteristics of a partnership accounting Profit and loss distribution Equity

Section 2 Initial investment and operating of partnership  partnership’s initial investment  1.invest In monetary assets cash partner’s asset——A partner’s asset——B  2.invest in non-monetary assets——Fair value Intangible assets Fixed assets – buildings Cash Inventory partner’s asset——A partner’s asset——B

Section 3 Valuation methods  bonus approach—— don’t confirm Non- recognition of assets partner’s asset——A 8000 partner’s asset——B 8000  goodwill approach——confirm Non-recognition of assets good will partner’s asset——B 16000

8 Section 4 Partner Withdrawal  Withdrawals partner Withdrawal——A partner Withdrawal——B Cash  The accounting period partner’s asset——A partner’s asset——B 24000

9 Section 5 Partner capital changes Project A （ 60 ％） B （ 40 ％） Total Capital balance Add: capital increase Less: capital reduction （ ） Partner Withdrawal （ ）（ ）（ ） partner invested net capital Add: Net Income Capital balance

10  Closing entries, the profit for the year according to 6:4 ratio of profit distribution assigned to the A and B profit for the year partner Withdrawal——A partner Withdrawal——B  The "partner withdrawals" account balance to "partner capital" account partner’s asset——A partner’s asset——B partner Withdrawal——A partner Withdrawal——B

Section 6 Loss and its distribution of partner  Labor factor 1.wage subsidies profit for the year capital partners - A partner capital - B partner capital - C profit for the year partner Capital - C capital Partners - A partner Capital - B

 2.dividend and wage subsidies Bonus is calculated:  Partnership based on net profit, based on net profit after deducting the wage subsidy. bonus = (profit partners - salaries and allowances) × dividend yield  Allowances based on deductions from wages and net profit after dividends. bonus = (profit partners - salaries and allowances - bonus) × dividend yield

 Capital factors Capital gains and losses pro rata according to: opening should be clearly defined is based on the capital balance, ending balance, or the average capital balance of capital allocated  1 capital and profit and loss distribution partner relationships (1) the opening capital balance allocated by (2) capital balance allocated by the end of (3) the average capital balance allocated by The formula for calculating the weighted average capital: the actual amount of investment = investment × the number of months the flow of investment the weighted average capital balance = investment ÷ 12 months  2. Partnership capital and interest subsidies First given in accordance with a partnership capital interest subsidies, while giving by labor salaries and allowances for a partner, then the remaining profit according to the average or a specific proportion.

14 Income sheet 2007ABCtotal net income bonus to A （ ） distributable profits wage subsidies to A and B （ ） distributable profits average distribution （ ） distributable profits 0 the distribution of net profit ABCtotal net income bonus to A （ 2400 ） distributable profits wage subsidies to A and B （ ） average distribution ( ） average distribution （ ） （ ） the distribution of net profit the distribution of net income （ ）