1. John Wiley & Sons, Inc. © 2005 Chapter 13 Accounting for Partnerships Prepared by Naomi Karolinski Monroe Community College and and Marianne Bradford Bryant College Accounting Principles, 7 th Edition Weygandt Kieso Kimmel

2. LIMITED LIFE Partnerships –have a limited life 1- (dissolution) whenever a partner withdraws or a new partner is admitted 2- ends involuntarily by death or incapacity of a partner 3- may end voluntarily through acceptance of a new partner or withdrawal of a partner

3. UNLIMITED LIABILITY Unlimited liability – each partner is personally and individually liable for all partnership liabilities. –creditors’ claims attach first to partnership assets –if insufficient assets claims then attach to the personal resources of any partner, irrespective of that partner’s capital equity in the company

4. CO-OWNERSHIP OF PROPERTY Partnership Assets –assets invested in the partnership are owned jointly by all the partners Partnership Income or Loss –co-owned; if the partnership contract does not specify to the contrary, net income or net loss is shared equally by the partners

5. ADVANTAGES AND DISADVANTAGES OF A PARTNERSHIP

6. THE PARTNERSHIP AGREEMENT Partnership agreement (Articles of co-partnership) –written contract 1 Names and capital contributions of the partners. 2 Rights and duties of partners. 3 Basis for sharing net income or net loss. 4 Provision for withdrawals of assets. 5 Procedures for submitting disputes to arbitration. 6 Procedures for the withdrawal or addition of a partner. 7 Rights and duties of surviving partners in the event of a partner’s death.

7. Which of the following is not a characteristic of a partnership: a. Taxable entity. b. Co-ownership of property. c. Mutual agency. d. Limited Life.

8. Which of the following is not a characteristic of a partnership: a. Taxable entity. b. Co-ownership of property. c. Mutual agency. d. Limited Life.

9. The NBC Company reports net income of $60,000. If partners N, B, and C have an income ratio of 50%, 30%, and 20%, respectively, C’s share of net income is: a. $30,000. b. $12,000. c. $18,000. d. No correct answer is given.

10. The NBC Company reports net income of $60,000. If partners N, B, and C have an income ratio of 50%, 30%, and 20%, respectively, C’s share of net income is: a. $30,000. b. $12,000. c. $18,000. d. No correct answer is given.