Mar Sean Jan Gabiosa

Advance Accounting 1
Chapter Summary

Chapter 1
Partnership Formation

Partnership is an association of two or more persons who contribute money, property, or

industry to a common fund with the intention of dividing profits among themselves.
Partnership is easy and less costly to establish than corporation.
Two types of Partnership
General partnership every partner is personally liable.
Limited partnership minimum of one general partner to be personally liable.
Features/Characteristics

Ease of Formation
Limited life
Assignment of Partners Interest
Unlimited Liability
Mutual Agency
Separate Legal Personality
Sharing Profits and Losses

Partnership with only internal reporting needs may not use GAAP.
Partnership which financial statements are presented to external users, should identify which
specific methods do not conform to GAAP
PFRS for SMEs. These standards would not apply to partnerships, in first place, which do not issue
financial statements.

Loans payable to partners are liabilities; not to capital account; have priority over partners equity.
Loans receivable from partners other receivables.

Capital Accounts
Withdrawals Capital, beg
Share in net loss Share in net income

Partnership Formation
1. Two Individuals
2. Individuals and Sole Proprietor
3. Two Sole Proprietors
4. Partnership and Sole Proprietor
5. Two Partnerships