‫بسم هللا الرحمن الرحيم‬

COMPANIES ACCOUNTING
The Course Contents:

(1) Accounting for Partnership .

 The Formation of the Partnership.

 The Net Income Allocation.
 The Changes in the contract of the partnership.
 The Liquidation of the Partnership.
(2) Accounting for Corporations.
 Accounting for Partnership

What is the partnership??

1- It is a firm which consists of at least two
partners( two or more).
2-Each partner has a capital account.
3-The profit and loss allocation will be according
to the agreement of the partners.
 What are the types of partnerships??
There are 2 types:
1- General partnership.
2- Limited partnership.
 What are the difference between the general
partnership and limited partnership???

1- General partnership:
All partners are general partners.
2- Limited partnership:
It has 2 kinds of partners (general and limited
partners) and at least one of the partners must
be general partner.
 What are the differences between the
general and limited partner ???

A) The general partner:

1-He has unlimited responsibility towards the company's liabilities.
2- He manages the company.
3- He can enter his name in the name of the company .
B) The limited partner:
1- He has a limited responsibility towards company's liabilities, it
means that his share of loss should not exceed his capital in the
company.
2- He can't participate in the management of the company.
3-He can't enter his name in the name of the company.
 First: The formation of the partnership

To form the partnership , each partner has to pay his

contribution (capital) according to the contract
…How??
The partner can pay his capital using one of
the following methods:
1- Cash.
2- Non- cash assets.
( assets or assets &liabilities)
(1) Presenting the contribution in Cash:

If the partner pays his share in the capital in cash , we 

prepare the following entry:

Dr Cr
Cash x
Partner '‘…'‘, Capital
x
 Example (1)
On 1/1/2012 (A) &(B )agreed to form a general partnership with total
capital $100000 . If you know that:
1- The share of partner A in the capital is $60000 and the partner B
is the rest.
2- Each partner will pay his share in cash.

Required: prepare the journal entry to record the formation of the

partnership.
Solution
The total capital = 100000
The capital of A = 60000
So, the capital of B = 100000 - 60000 = 40000
 So, the entry is:

Dr Cr

Cash 100000
Partner ''A'‘, Capital 60000
Partner '‘B'‘, Capital 40000
2) Presenting the contribution as a Group of Assets
:
In this case all the assets presented should be recorded 
according to the fair value (market value).
In this case we should compare between the partner’s share 
in the capital and the fair value of the presented assets.
Here ,there are the following cases:
1- The partner’s share in the capital = the fair value of the
assets (no cash paid or received)
2- The partner’s share in the capital does not equal the 
fair value of the assets
( The partner should pay or receive the difference 
in cash)
3- If the partner’s share in the capital is not determined, 
here , the capital of the partner will equal the fair value
of the presented assets.
 Example(2(
On 1 January 2011, A and B agreed to form a partnership with a total
capital of $ 400,000.
If you know that:
1- Partner A paid 25% of the capital in cash.
2- Partner B’ s share in the capital 75% and he presented the following
assets :
Car 50,000
Inventory 70,000
Equipment 180,000 
Required 
Prepare the journal entries to record the formation of the partnership.
 Solution

 The total capital = 400000

 The capital of A = 400000 * 25% =100000
 So, the capital of B = 400000 - 100000 = 300000
 or = 400000 * 75% =300000
 1) Partner A :
 He paid cash ,so the entry is :
Dr Cr
Cash 100000
Partner '‘A'‘, Capital
100000
2) Partner B:
He presented assets and the value of them
= 50000+70000 + 180000 = 300000
His share in capital = 300000
So, there is no difference and the entry is:
Dr Cr
Car 50,000
Inventory 70,000
Equipment 180,000
Partner '‘B'‘, Capital 300000