modul ke: fakultas program studi pengantar akuntansi ii partnership 2 reff. warren reeve and fees....

Modul ke:

Fakultas

Program Studi

Pengantar Pengantar Akuntansi IIAkuntansi IIPartnership 2

Reff. Warren Reeve and Fees.

Nurul Hidayah, SE,Ak,MSi Hari Setiyawati , SE,Ak,MSi

13FEB

Akuntansi

Alternative Forms of Business EntitiesAlternative Forms of Business EntitiesAlternative Forms of Business EntitiesAlternative Forms of Business Entities

Disadvantages• Limited life• Unlimited liability• Co-ownership of

partnership property• Mutual agency

Joe and Marty’s

A partnership is an association of two

or more individuals.

A partnership is an association of two

or more individuals.


An important right of partners is to participate in

the income of the partnership.

An important right of partners is to participate in

the income of the partnership.


Each partner must report their share of partnership income on their personal

tax returns.

Each partner must report their share of partnership income on their personal

tax returns.


A partnership is created by a contract, known as

the partnership agreement or articles of

partnership.

A partnership is created by a contract, known as

the partnership agreement or articles of

partnership.


A variant of the regular partnership

is a limited partnership.

A variant of the regular partnership

is a limited partnership.

This form of partnership allows partners that are

not involved in the operations of the

partnership to retain limited liability.

This form of partnership allows partners that are

not involved in the operations of the

partnership to retain limited liability.

Limited Liability CorporationsLimited Liability CorporationsLimited Liability CorporationsLimited Liability Corporations

Combines the advantages of the corporate and partnership forms.

Owners are termed “members” rather than “partners.”

Members must create an operating agreement. LLC may elect to be treated as a partnership

for tax purposes.

ContinuedContinued

Limited Liability CorporationsLimited Liability CorporationsLimited Liability CorporationsLimited Liability Corporations

Unless specified in the operating agreement, LLCs have a limited life.

Members may elect operating the LLC as a “member managed” entity.

LLC provides limited liability for the members. LLCs must file “articles of organization” with

state governmental authorities.

Comparison of Alternate Entity Characteristics


Ease of FormationEase of Formation

Proprietorship Simple

Corporation Complex

Partnership Simple

LLC Moderate



Legal LiabilityLegal Liability

Proprietorship No limitation

Corporation Limited liability

Partnership No limitation

LLC Limited liability



TaxationTaxation

Proprietorship Nontaxable entity

Corporation Taxable entity

Partnership Nontaxable entity

LLC Nontaxable entity by election



Limitation on Life of EntityLimitation on Life of Entity

Proprietorship Yes

Corporation No

Partnership Yes

LLC Yes



Ease of Raising CapitalEase of Raising Capital

Proprietorship Difficult

Corporation Easier

Partnership Moderate

LLC Moderate

Equity Reporting for Equity Reporting for Alternative Entity FormsAlternative Entity Forms


ProprietorshipsProprietorships

Proprietorships use a capital account to record investments by the owner of the business.

Withdrawals by the owner are recorded in the owner’s drawing account.



ProprietorshipsProprietorships

Greene LandscapesStatement of Owner’s Equity

For the year ended December 31, 2006Duncan Greene, capital, Dec. 31, 2005 $345,000Net income $79,000Less withdrawals 35,000Increase in owner’s equity 44,000Duncan Greene, capital, Dec. 31, 2006 $389,000



CorporationsCorporations

Investments by stockholders in the business use capital stock accounts, such as Common Stock and Preferred Stock.

Dividends to owners (stockholders) are recorded by a debit to Retained Earnings.



CorporationsCorporations



Partnerships and Limited Liability CorporationsPartnerships and Limited Liability Corporations

Investments and withdrawals for partnerships is similar to proprietorships, except there is a capital and drawing account for each partner.

Limited liability corporations are similar to a partnership except that each owner is referred to as “member.”

Equity Reporting for Alternative Equity Reporting for Alternative Entity FormsEntity Forms

Equity Reporting for Alternative Equity Reporting for Alternative Entity FormsEntity Forms

PartnershipsPartnerships

Forming a PartnershipForming a Partnership Forming a PartnershipForming a Partnership

Joseph Stevens and Earl Foster agree to combine their hardware businesses in a partnership. They

agree that the partnership is to assume the liabilities of the separate businesses.

Joseph Stevens and Earl Foster agree to combine their hardware businesses in a partnership. They

agree that the partnership is to assume the liabilities of the separate businesses.

Apr. 1 Cash 7 200 00Accounts Receivable 16 300 00 Merchandise Inventory 28 700 00 Store Equipment 5 400 00Office Equipment 1 500 00

Allowance for Doubtful Accounts1 500 00Accounts Payable2 600 00Joseph Stevens, Capital55 000 00

Stevens’ Transfer of Assets, Liability, and Equity


A similar entry would be made for the assets, liabilities, and

equity of Earl Foster.

A similar entry would be made for the assets, liabilities, and

equity of Earl Foster.


Assume that instead of forming a partnership, the two men formed a limited liability corporation.

Assume that instead of forming a partnership, the two men formed a limited liability corporation.

Apr. 1 Cash 7 200 00Accounts Receivable 16 300 00

Merchandise Inventory 28 700 00Store Equipment 5 400 00Office Equipment 1 500 00

Allowance for Doubtful Accounts1 500 00Accounts Payable2 600 00Joseph Stevens, Member Equity55 000 00

Stevens’ Transfer of Assets, Liability, and Equity

Dividing IncomeDividing Income Dividing IncomeDividing Income

Services of PartnersServices of Partners

The partnership agreement of Jennifer Stone and Crystal Mills provides for Stone to have an annual salary allowance of $30,000 and Mills is to receive $24,000. Any net income is to be divided equally.

The firm had a net income of $75,000.

The partnership agreement of Jennifer Stone and Crystal Mills provides for Stone to have an annual salary allowance of $30,000 and Mills is to receive $24,000. Any net income is to be divided equally.

The firm had a net income of $75,000.

J. Stone C. Mills TotalSalary allowance $30,000 $24,000 $54,000Remaining income 10,500 10,500 21,000Division of net income $40,500 $34,500 $75,000



Dec. 31 Income Summary 75 000 00

Jennifer Stone, Capital40 500 00

Crystal Mills, Capital 34 500 00


LLC AlternativeLLC Alternative


Jennifer Stone, Member Equity40 500 00

Crystal Mills, Member Equity 34 500 00


Services of Partners and InvestmentsServices of Partners and Investments

The partnership agreement of Jennifer Stone and Crystal Mills provides for Stone to have an

annual salary allowance of $30,000 and Mills is to receive $24,000. Interest of 12% is provided on each partner’s capital balance on January 1. Any net income is to be divided equally. The

firm had a net income of $75,000.

The partnership agreement of Jennifer Stone and Crystal Mills provides for Stone to have an

annual salary allowance of $30,000 and Mills is to receive $24,000. Interest of 12% is provided on each partner’s capital balance on January 1. Any net income is to be divided equally. The

firm had a net income of $75,000.


Services of Partners and InvestmentsServices of Partners and Investments

J. Stone C. Mills TotalSalary allowance $30,000 $24,000 $54,000Interest allowance 9,600 7,200 16,800

Division of net income $41,700 $33,300 $75,000$80,000 x

12%

$80,000 x 12%

$60,000 x 12%

$60,000 x 12%

Remaining income 2,100 2,100 4,200




Jennifer Stone, Capital41 700 00

Crystal Mills, Capital 33 300 00


LLC AlternativeLLC Alternative


Jennifer Stone, Member Equity41 700 00

Crystal Mills, Member Equity 33 300 00


Allowances Exceed Net IncomeAllowances Exceed Net Income

Assume the same facts as before except that the net income is only $50,000.

Assume the same facts as before except that the net income is only $50,000.

J. Stone C. Mills TotalSalary allowance $30,000 $24,000 $54,000Interest allowance 9,600 7,200 16,800 Total $39,600 $31,200 $70,800

Division of net income $29,200 $20,800 $50,000Deduct excess equally 10,400 10,400 20,800

Partnership DissolutionPartnership DissolutionPartnership DissolutionPartnership Dissolution

Admitting a PartnerAdmitting a Partner

1. Purchasing an interest from one or more of the current partners.

2. Contributing assets to the partnership.

A person may be admitted to a partnership only with the consent of all partners by:


Purchasing an Interest in a PartnershipPurchasing an Interest in a Partnership

Partners Tom Andrews and Nathan Bell have capital balances of $50,000 each.

On June 1, each sells one-fifth of his equity to Joe Canter for $10,000 in cash.

Partners Tom Andrews and Nathan Bell have capital balances of $50,000 each.

On June 1, each sells one-fifth of his equity to Joe Canter for $10,000 in cash.


Purchasing an Interest in a PartnershipPurchasing an Interest in a Partnership

June 1 Tom Andrews, Capital 10 000 00

Nathan Bell, Capital 10 000 00

Joe Canter, Capital20 000 00

For a LLC, members’ equity accounts would have been used rather than capital accounts.

For a LLC, members’ equity accounts would have been used rather than capital accounts.


Contributing Assets to a PartnershipContributing Assets to a Partnership

Partners Donald Lewis and Gerald Morton have capital balances of $35,000 and

$25,000, respectively. On June 1, Sharon Nelson joins the partnership by

permission and makes an investment of $20,000 cash.

Partners Donald Lewis and Gerald Morton have capital balances of $35,000 and

$25,000, respectively. On June 1, Sharon Nelson joins the partnership by

permission and makes an investment of $20,000 cash.


Contributing Assets to a PartnershipContributing Assets to a Partnership

June 1 Cash 20 000 00

Sharon Nelson, Capital20 000 00

For a LLC, Sharon Nelson, Member Equity would have been credited.

For a LLC, Sharon Nelson, Member Equity would have been credited.


Revaluation of AssetsRevaluation of Assets

Partners Donald Lewis and Gerald Morton have capital balances of $35,000 and $25,000, respectively. The balance in

Merchandise Inventory is $14,000 and the current replacement value is $17,000.

The partners share net income equally.

Partners Donald Lewis and Gerald Morton have capital balances of $35,000 and $25,000, respectively. The balance in

Merchandise Inventory is $14,000 and the current replacement value is $17,000.

The partners share net income equally.


June 1 Merchandise Inventory 3 000 00

Donald Lewis, Capital1 500 00

Gerald Morton, Capital1 500 00

Because the LLC alternative follows a pattern of replacing “Capital” with “Member Equity,”

the LLC entry will not be shown again.

Because the LLC alternative follows a pattern of replacing “Capital” with “Member Equity,”

the LLC entry will not be shown again.

Revaluation of AssetsRevaluation of Assets


Partner BonusesPartner Bonuses

On March 1, the partnership of Marsha Jenkins and Helen Kramer admit Alex

Diaz as a new partner. The assets of the old partnership are adjusted to a fair

market values and the resulting capital balances for Jenkins and Kramer are $30,000 and $24,000, respectively.

On March 1, the partnership of Marsha Jenkins and Helen Kramer admit Alex

Diaz as a new partner. The assets of the old partnership are adjusted to a fair

market values and the resulting capital balances for Jenkins and Kramer are $30,000 and $24,000, respectively.



Jenkins and Kramer agree to admit Diaz as a partner for $31,000. In return, Diaz

will receive a one-third equity in the partnership and will share income and

losses equally with Jenkins and Kramer.

Jenkins and Kramer agree to admit Diaz as a partner for $31,000. In return, Diaz

will receive a one-third equity in the partnership and will share income and

losses equally with Jenkins and Kramer.


Partner Bonuses from New PartnerPartner Bonuses from New Partner

Equity of Jenkins $20,000Equity of Kramer 24,000Diaz’s Contribution 31,000Total equity after admitting Diaz $75,000Diaz’s interest (1/3 x $75,000) $25,000

Diaz’s contribution $31,000Diaz’s equity after admission 25,000Bonus paid to Jenkins and Kramer $ 6,000



Mar. 1 Cash 31 000 00

Alex Diaz, Capital25 000 00

Marsha Jenkins, Capital3 000 00

Helen Kramer, Capital3 000 00 $6000 ÷ 2



After adjusting the market values, the capital balance of Janice Cowen is

$580,000 and the capital balance of Steve Dodd is $40,000. Ellen Chua receives a

one-fourth interest in the partnership for a contribution of $30,000. Before admitting

Chua, Cowen and Dodd shared net income using a 2 to 1 ratio.

After adjusting the market values, the capital balance of Janice Cowen is

$580,000 and the capital balance of Steve Dodd is $40,000. Ellen Chua receives a

one-fourth interest in the partnership for a contribution of $30,000. Before admitting

Chua, Cowen and Dodd shared net income using a 2 to 1 ratio.


Partner Bonuses to New PartnerPartner Bonuses to New Partner

Equity of Cowen $ 80,000Equity of Dodd 40,000Chua’s Contribution 30,000Total equity after admitting Chua $150,000Chua’s interest (1/4 x $150,000) $ 37,500

Chua’s contribution $30,000Chua’s equity after admission 37,500Bonus paid to Chua $ 7,500



Mar. 1 Cash 30 000 00

Janice Cowen, Capital 5 000 00

Steve Dodd, Capital 2 500 00

Ellen Chua, Capital37 500 00

1/3 x $7,50

0

2/3 x $7,50

0

Liquidating PartnershipsLiquidating PartnershipsLiquidating PartnershipsLiquidating Partnerships

When a partnership goes out of business, the winding-up

process is called the liquidation of a partnership.

When a partnership goes out of business, the winding-up

process is called the liquidation of a partnership.


The sale of the assets is called realization.

The sale of the assets is called realization.


Farley, Greene, and Hall share income and losses in a ratio of 5:3:2. On April 9, after discontinuing

operations, the firm had the following trial balance.

Farley, Greene, and Hall share income and losses in a ratio of 5:3:2. On April 9, after discontinuing

operations, the firm had the following trial balance.

Cash $11,000Noncash Assets 64,000Liabilities $ 9,000Jean Farley, Capital 22,000Brad Greene, Capital 22,000Alice Hall, Capital 22,000 Total $75,000 $75,000


Between April 10 and April 30, 2006, Farley, Greene, and Hall sell all

noncash assets for $72,000.



Gain on RealizationGain on Realization


Balance before realization $11,000 $64,000 $9,000

Left side of statement

Noncash Cash Assets Liabilities

Sale of assets and divisionof gain +72,000 -64,000 —



Right side of statement

Farley Greene Hall Capital Capital Capital

Sale of assets and divisionof gain +4,000 +2,400 +1,600

$8,000 gain x .50

$8,000 gain x .50

$8,000 gain x .30

$8,000 gain x .30

$8,000 gain x .20

$8,000 gain x .20





Sale of assets and divisionof gain +72,000 –64,000 —

Balance after realization $83,000 $0 $9,000






Balance after realization $26,000 $24,400 $23,600


The partnership’s liabilities are paid, $9,000.

The partnership’s liabilities are paid, $9,000.





Balance before realization $11,000 $64,000 $9,000Sale of assets and division

of gain +72,000 –64,000 —Balance after realization $83,000 $ 0 $9,000Payment of liabilities –9,000 — –9,000





of gain +72,000 –64,000 —Balance after realization $83,000 $ 0 $9,000Payment of liabilities –9,000 — –9,000Balance after payment $74,000 $ 0 $ 0


The remaining cash, $74,000, is paid to each partner in

accordance with the partner’s capital balance.

The remaining cash, $74,000, is paid to each partner in

accordance with the partner’s capital balance.






of gain +72,000 –64,000 —Balance after realization $83,000 $ 0 $9,000Payment of liabilities –9,000 — –9,000Balance after payment $74,000 $ 0 $ 0Partners’ cash distributed –74,000 — —Final balances $ 0 $ 0 $ 0






Balance after realization $26,000 $24,400 $23,600Payment of liabilities — — —Balance after payment $26,000 $24,400 $23,600Partners’ cash distributed –26,000 –24,400 –23,600Final balances $ 0 $ 0 $ 0


Sale of AssetsSale of Assets

Apr. 30 Cash 72 000 00

Noncash Assets64 000 00

Gain on Realization8 000 00


Division of GainDivision of Gain

Apr. 30 Gain on Realization 8 000 00

Jean Farley, Capital4 000 00

Brad Greene, Capital2 400 00

Alice Hall, Capital1 600 00


Payment of LiabilitiesPayment of Liabilities

Apr. 30 Liabilities 9 000 00

Cash 9 000 00


Distribution of Cash to PartnersDistribution of Cash to Partners

Apr. 30 Jean Farley, Capital 26 000 00

Brad Greene, Capital 24 400 00

Alice Hall, Capital 23 600 00

Cash 74 000 00






Loss on RealizationLoss on RealizationLoss on RealizationLoss on Realization





Sale of assets and divisionof loss +44,000 –64,000 —





Sale of assets and divisionof loss –10,000 –6,000 –4,000

$20,000 loss x .50

$20,000 loss x .50

$20,000 loss x .30

$20,000 loss x .30

$20,000 loss x .20

$20,000 loss x .20





Sale of assets and divisionof loss +44,000 –64,000 —

Balance after realization $55,000 $0 $9,000





Sale of assets and divisionof loss –10,000 –6,000 –4,000

Balance after realization $12,000 $16,000 $18,000


The liabilities of the partnership are paid, $9,000.

The liabilities of the partnership are paid, $9,000.

Loss on RealizationLoss on RealizationLoss on RealizationLoss on Realization





of loss +44,000 –64,000 —Balance after realization $55,000 $ 0 $9,000Payment of liabilities –9,000 — –9,000





of loss +44,000 –64,000 —Balance after realization $55,000 $ 0 $9,000Payment of liabilities –9,000 — –9,000Balance after payment $46,000 $ 0 $ 0

Terima KasihTerima KasihHari Setiyawati dan Nurul H