1. CHAPTER 3 ACCOUNTING FOR PARTNERSHIPS 1Dr. BALAMURUGAN MUTHURAMAN

2. PARTNERSHIPS MEANING nThe Uniform Partnership Act defines a partnership as: "an association of two or more persons to carry on, as co-owners, a business for profit". nPartnerships generally are associated with the practice of law, medicine, public accounting and other professions, and also with small business enterprises. 2Dr. BALAMURUGAN MUTHURAMAN

3. nGeneral partnership- In which all partners have unlimited personal liability for debts of the partnership. nLimited Liability Partnerships (LLPs)- Individual partners of LLPs are personally responsible for their own actions and for the actions of employees under their supervision. 3Dr. BALAMURUGAN MUTHURAMAN

4. Organization of a Limited Liability Partnership (LLP) Basic Characteristics of the LLP: 1.Ease of Formation. 2.Limited Life. 3.Mutual Agency. 4.Co-Ownership of Partnership Assets and Earnings. 4Dr. BALAMURUGAN MUTHURAMAN

5. PARTNERSHIP CONTRACT A good business practice requires the partnership contract in writing. The followings are a few important points to be covered in a written contract for a LLP: 5Dr. BALAMURUGAN MUTHURAMAN

6. 1.The formation date and the planned duration of the partnership; the names of the partners, and the name and business activities of the partnership. 2.The assets to be invested by each partner, the procedure for valuing noncash investments, and the penalties for a partner's failure to invest and maintain the agreed amount of capital. 6Dr. BALAMURUGAN MUTHURAMAN

7. 3.The authority, the rights and the duties of each partner. 4.The accounting period to be used, the nature of accounting records, financial statements and audits by independent public accountants. 5.The net income (loss) sharing plans. 7Dr. BALAMURUGAN MUTHURAMAN

8. 6.The drawings allowed to each partner. 7.Insurance on the lives of partners. 8.Provision for settlement of dispute. 9.Provision for liquidation of the partnership at the end of the term specified in the contract or at the death or retirement of a partner. 8Dr. BALAMURUGAN MUTHURAMAN

9. Formation of Partnership BEING INITIAL INVESTMENT BY PARTNER Assets Dr.Xxx Liabilities Cr.Xxx Partner’s Capital Cr.Xxx Allocation of Partnership P&L Transfer of profit to distribution account P&L Summary Dr.Xxx Profit distribution Cr.xxx 9Dr. BALAMURUGAN MUTHURAMAN

10. DISTRIBUTION OF PROFIT TO PARTNERS Profit Distribution Dr.xxx Partner A Capital Cr.Xxx Partner B Capital Cr.Xxx Drawings & Loans made by partners Cash Drawings by partners Partner Drawings Dr.Xxx Cash at Bank Cr.Xxx Partner capital Dr.Xxx Partner Drawings Cr.xxx 10Dr. BALAMURUGAN MUTHURAMAN