Partnership Formation

Operation Type 1 Type 2

Dissolution Admission of New Partner Payment
the money topaid
the business
will go to the Payment to individual
money paid partners
will not affect the
business business
No money, no increase in assets
Yes money, increase in assets unless with revaluation
Yes money, no inc in liab No money, no
No money, no increase
increase inin liab
equity
yes money, inc in net assets unless with revaluation
Transfer of equity to the new
Meron
Dr. Cashat wala partner
Debit Old Partner Capital
Cr. New Partner Credit New Partner Capital
Adjustments
 After Admission
Case 1 No adjustment 20% of NN
KK 252,000.00 50,400.00 201,600.00 201,600.00
LL 126,000.00 25,200.00 100,800.00 100,800.00
MM 42,000.00 8,400.00 33,600.00 33,600.00
Total 420,000.00 84,000.00
84,000.00
NN 84,000.00 KK LL MM
420,000.00 Orig 252,000.00 126,000.00 42,000.00
Case 2 Revaluation Total Net Assets must be Revaluation 18,000.00 9,000.00 3,000.00
NN 90,000.00 20% 450,000.00 Bal. After Rev 270,000.00 135,000.00 45,000.00
Old Capital 420,000.00 Transfer to NN (54,000.00) (27,000.00) (9,000.00)
Revaluation 30,000.00 Bal. After Admission 216,000.00 108,000.00 36,000.00
Credit KK, Cap 18,000.00
Debit
LL Cap Other Assets 30,000.00 9,000.00
MM Cap 3,000.00
Debit KK, Cap
LL, Cap
MM, Cap
Credit NN, Cap 90,000.00

Case 3 New partner will INVEST the cash to the partnership for 20%. Use Bonus Method to new partner\
Entry:
Dr. Cash 90,000.00
Cr. NN, Capital 90,000.00
 New partnership capital structure before bonus bonus after bonus
KK 60% 252,000.00 (7,200.00) 244,800.00
LL 30% 126,000.00 (3,600.00) 122,400.00
MM 10% 42,000.00 (1,200.00) 40,800.00
NN 90,000.00 20% 102,000.00
Total Net Assets 510,000.00 12,000.00 510,000.00
Entry:
Dr. KK 7,200.00
LL 3,600.00
MM 1,200.00
Cr. NN 12,000.00

Case 4 New partner will invest 200,000 for 20% capital interest. Use bonus method to old partners
Entry:
Dr. Cash 200,000.00
Cr. NN, Capital 200,000.00

New partnerhip cap structure

KK 60% 252,000.00 45,600.00 297,600.00
LL 30% 126,000.00 22,800.00 148,800.00
MM 10% 42,000.00 7,600.00 49,600.00
NN 200,000.00 20% 124,000.00
620,000.00 76,000.00 620,000.00
Before adjustment aftger
KK 60% -12% 48%
LL 30% -6% 24%
MM 10% -2% 8%
NN 0% 20% 20%
100% 0% 100%

Case 5 New partner will invest 200,000 for 20% capital interest. Use revaluation method UP attrib to land
Entry:
 Dr. Cash 200,000.00
Cr. NN, Capital 200,000.00

New partnerhip cap structure New ratio

KK 60% 252,000.00
LL 30% 126,000.00
MM 10% 42,000.00
420,000.00 80% 525,000.00
NN 200,000.00 20% 1,000,000.00

KK 60% 252,000.00 228,000.00 480,000.00 48%

LL 30% 126,000.00 114,000.00 240,000.00 24%
MM 10% 42,000.00 38,000.00 80,000.00 8%
NN 200,000.00 20% 200,000.00 20%
New Total b4 adjust 620,000.00 380,000.00 1,000,000.00

ENTRY:
Dr. Land 380,000.00
Cr. KK 228,000.00
Cr. LL 114,000.00
Cr. MM 38,000.00
Case 6 New partner will invest 200,000 for 20% capital interest. Use revaluation method DOWN attrib to land
Entry:
Dr. Cash 200,000.00
Cr. NN, Capital 200,000.00

New partnerhip cap structure New ratio

KK 60% 252,000.00
LL 30% 126,000.00
MM 10% 42,000.00
420,000.00 80% 525,000.00
NN 200,000.00 20% 1,000,000.00
KK 60% 252,000.00 252,000.00 48%
LL 30% 126,000.00 126,000.00 24%
MM 10% 42,000.00 42,000.00 8%
NN 200,000.00 (95,000.00) 105,000.00 20%
New Total b4 adjust 620,000.00 (95,000.00) 525,000.00

Dr. NN, Capital 95,000.00

Cr. Land 95,000.00

50% 30% 20%

XX YY ZZ AA Total
Orig 250,000.00 150,000.00 100,000.00 - 500,000.00
Increase 30,000.00 18,000.00 12,000.00 - 60,000.00
After adj 280,000.00 168,000.00 112,000.00 - 560,000.00
Gib 25% to AA (70,000.00) (42,000.00) (28,000.00) 140,000.00 -
After AA 210,000.00 126,000.00 84,000.00 140,000.00 560,000.00
p/l 37.50% 22.50% 15% 25% 100%
NN Total
420,000.00
30,000.00
450,000.00
90,000.00 -
90,000.00 450,000.00