1. Chapter 8 Partnership accounting

2. 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. 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. 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. 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

6. Section 2 Initial investment and operating of partnership  partnership’s initial investment  1.invest In monetary assets cash 80 000 partner’s asset——A 40 000 partner’s asset——B 40 000  2.invest in non-monetary assets——Fair value Intangible assets 20 000 Fixed assets – buildings 80 000 Cash 14 000 Inventory 70 000 partner’s asset——A 100 000 partner’s asset——B 84 000

7. 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 16000 partner’s asset——B 16000

8. 8 Section 4 Partner Withdrawal  Withdrawals partner Withdrawal——A 2 000 partner Withdrawal——B 2 000 Cash 4 000  The accounting period partner’s asset——A 24000 partner’s asset——B 24000

9. 9 Section 5 Partner capital changes Project A （ 60 ％） B （ 40 ％） Total Capital balance 80 00070 000150 000 Add: capital increase 10 000 Less: capital reduction （ 6 000 ） Partner Withdrawal （ 12 000 ）（ 18 000 ）（ 30 000 ） partner invested net capital 78 00046 000124 000 Add: Net Income 41 40027 60069 000 Capital balance 119 40073 600193 000

10. 10  2007.12.31 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 69 000 partner Withdrawal——A 41400 partner Withdrawal——B 27600  The "partner withdrawals" account balance to "partner capital" account partner’s asset——A 12000 partner’s asset——B 18 000 partner Withdrawal——A 12 000 partner Withdrawal——B 18 000

11. Section 6 Loss and its distribution of partner  Labor factor 1.wage subsidies 2007.12.31 profit for the year 120 000 capital partners - A 48 000 partner capital - B 48 000 partner capital - C 24 000 2008.12.31 profit for the year 24 000 partner Capital - C 8 000 capital Partners - A 16 000 partner Capital - B 16 000

12.  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

13.  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. 14 Income sheet 2007ABCtotal net income 120 000 bonus to A （ 12 000 ） 12 000 distributable profits 108 000 wage subsidies to A and B （ 36 000 ） 20 00016 00036 000 distributable profits 72 000 average distribution （ 72000 ） 24 000 72 000 distributable profits 0 the distribution of net profit56 00040 00024 000120 000 2008ABCtotal net income 24 000 bonus to A （ 2400 ） 2 400 distributable profits 21 600 wage subsidies to A and B （ 36 000 ） 20 00016 00036 000 average distribution (14 400 ） average distribution 14 400 （ 4 800 ） （ 14 400 ） the distribution of net profit the distribution of net income17 60011 200 （ 4 800 ） 24 000