Académique Documents
Professionnel Documents
Culture Documents
Special Concerns
I. I. Journal entries same as in sole proprietorship except for the following transactions which
are peculiar to a partnership:
Cash xxx
Accounts/Loans/ xxx
Notes Payable or Due
to Partner or Loan
from
Partner
Accounts/Loans/ xxx
Notes Receivable or Due
from Partner or Loan to
Partner
Cash xxx
a. III. Closing entries drawing accounts are not automatically closed to the capital accounts;
drawing accounts are closed to the capital accounts only if agreed upon in the articles of co-
partnership.
1. Merchandise Inventory xx
Income Summary xx
To set up ending inventory
3. Income Summary xx
All Nominal Accounts with Debit Balances xx
To close all nominal accounts with debit balances to income summary.
NET INCOME
4. Income Summary xx
Partners Drawing xx
To distribute profits to partners
NET LOSS
4. Partners Drawing xx
Income Summary xx
To distribute losses to partners
INCREASES/DECREASES IN CAPITAL &
DRAWING ACCOUNTS
CAPITAL DRAWING
Decrease Increase Increase Decrease
Permanent Initial investment Temporary Share in Net
withdrawal0 withdrawal Income
Sale of equity Additional Share in Net Loss
Investment
Payment of
partnership
liability from
personal funds
Debit balance in Credit balance in
drawing drawing
a. 1. As to Capitalist Partner
a. a. Division of Profit
1. In accordance with agreement.
2. In the absence of an agreement, division of profits is in accordance with capital
contributions.
a. b. Division of Loss
1. In accordance with agreement.
2. If only the division of profits is agreed upon, then the division of losses will be the
same as the agreement on division of profits.
3. In the absence of an agreement, division of losses is in accordance with capital
contribution.
a. 2. As to Industrial Partner
b. a. Division of Profit
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall receive a just and
equitable share of the profits.
a. b. Division of Loss
1. In accordance with agreement.
2. In the absence of an agreement, the industrial partner shall have no share in the
losses.
a. 1. Equally
a. 2. Arbitrary Ratio
b. a. Fractions
c. b. Percentages
d. c. Ratio and Proportion
a. 3. Capital Ratio
b. a. Original/Initial investment
c. b. Beginning capital balance
d. c. Ending capital balance
e. d. Average capital most equitable method
a. 4. Allowing Salaries, Interest and Bonus considered as part of the distribution of net
income
General Guidelines
1. 1. Partner salary allowances, interest allowances on capital account balances and bonus
are not expenses in the determination of partnership net income.
Partner, Capital
Debit Credit
Permanent Initial Investment
Withdrawals Additional
Investments
Partner, Drawing
Debit Credit
Net Loss Net Income
Temporary
Withdrawals
Pro-forma Entries
1. 2. arbitrary ratio
b. a. percentage 40%:60%
c. b. fraction 2/5:3/5
Average Capital:
John P465,000 150,000 x 465000/927,500= P 75,202.16
Martha 462,500 150,000x 462,500/927,500 = P 74,797.84
P927,500
=======
7. Allowing interest on partners capital balances, salaries and bonus, balance equally.
8. Allowing interest on partners capital balances, salaries and bonus, balance equally.(NET INCOME
IS INSUFFICIENT)
-10% interest on ending capital,
-salary allowance to John, P50,000; Martha, P60,000
-20% bonus to John
-balance equally
9. Allowing interest on partners capital balances, salaries and bonus, balance 4:6
Note
Net Sales 1 P627,635
Cost of Sales 2 (456,225)
Gross Profit P171,410
Other Income 3 1,771
Total Income P173,181
Operating
expenses
Administrative 4 P90,890
expense
Distribution 5 19,615
costs
Finance cost 7 5,100 (114.625)
NET INCOME P57,576
======
Cost
of
Note 2 Sales
Merch
andise
Invent
ory,
Januar 18
y1 P 8,500
Add:
Net
cost of
purcha
ses
Purch 36
ases P 6,200
Purch P 3,
ase 653
Discou
nts
Purch
ase
Return
s and
Allowa 18, 21
nces 265 ,918
Net
purcha 34
ses P 4,282
Add:
Freight 1 34
in ,250 5,532
Total
goods
availa
ble for 53
sale P 4,032
Merch
andise
Invent
ory,
Dece
mber 7
31 7,777
Cost
of 45
Sales P 6,255
Other
Incom
Note 3 e
Gain
on
Sale of
Office
Equip
ment P 351
Interes
t
Incom
e 1,420
Total P 1
,771
Admini
strativ
e
Expen
Note 4 ses
Salarie
s&
Wages P 54,200
Rent
Expen
se 30,000
Depre
ciation
Expen
se-
Office
Equip
ment 3,830
Doubtf
ul
Accou
nts
Expen
se 2,340
Office
Suppli
es
used 520
Total P 90,890
Distrib
ution
Note 5 Costs
Sales
Comm
ission P 18,935
Freight
out 680
Total P 19,615
Financ
Note 7 e cost
Interes
t
expen
se P 4,850
Discou P 250
nt lost
Total P 5,100
NMA Company
Statement of Changes in Partners Equity
For the Year Ended, December 31, 2015
Bea, Capital
3/1 20,000 1/1 70,000
Carmi, Capital
1/1 30,000
4/1 10,000
Prepare the entry to distribute net income among the three partners assuming:
a. a. Net income is divided equally.
b. b. Net income is divided as follows: Ana ; Bea ; Carmi .
c. c. Net income is divided as follows: Ana 50%; Bea 30%; Carmi 20%.
d. d. Net income is divided as follows: 3:2:1
e. e. Net income is divided based on original/initial capital contribution which were as
follows: Ana P20,000; Bea P30,000; Carmi P10,000.
f. f. Net income is divided based on beginning capital balances.
g. g. Net income is divided based on ending capital balances.
h. h. Net income is divided based on average capital.
a. 2. Assume the same given information in No. 1. Prepare the entry to divide net income if
net income is to be divided as follows:
a. a. Interest of 10% on beginning capital balances.
b. b. Annual salaries of P5,000 to Ana and P4,000 to Bea.
c. c. Bonus to Carmi amounting to P16,000.
d. d. Remainder to be divided 50:30:20.
a. 3. Using the same given information in No. 2, prepare the entry to divide net income if net
income is P35,000 only.
a. 4. Using the same given information in No. 2, prepare the entry to close income summary
if the partnership incurred a net loss of P60,000 for the year.
2016