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0 Chapter 14 Partnership Liquidation 1279697122

The document discusses the process of partnership liquidation. It states that liquidation involves converting assets to cash, settling liabilities, and distributing any remaining amounts to owners. It describes the order of priority for settling claims as outside creditors first, then inside creditors, then owners' interests. The document also discusses methods of liquidation as lump-sum or installment, and the procedures for accounting for each. It outlines the order of priority over a partner's personal assets to settle any deficiency in their capital balance.

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Ian Ranilopa
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457 views10 pages

0 Chapter 14 Partnership Liquidation 1279697122

The document discusses the process of partnership liquidation. It states that liquidation involves converting assets to cash, settling liabilities, and distributing any remaining amounts to owners. It describes the order of priority for settling claims as outside creditors first, then inside creditors, then owners' interests. The document also discusses methods of liquidation as lump-sum or installment, and the procedures for accounting for each. It outlines the order of priority over a partner's personal assets to settle any deficiency in their capital balance.

Uploaded by

Ian Ranilopa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Chapter 14: Partnership Liquidation (FAR

by: Millan)
Chapter 14
Partnership Liquidation
Learning Objectives
1. State the order of priority in the settlement
of claims in cases of liquidation.
2. Account for the liquidation of a partnership.

Chapter 14: Partnership Liquidation (FAR


by: Millan)
Partnership Liquidation

• Liquidation is the termination of business operations or the


winding up of affairs. It is a process by which
a. the assets of the business are converted into cash,
b. the liabilities of the business are settled, and
c. any remaining amount is distributed to the owners.

Chapter 14: Partnership Liquidation (FAR


by: Millan)
Methods of liquidation

1. Lump-sum liquidation – the partners’ claims are


settled in a single, lump-sum payment after all
non-cash assets are realized and after all
liabilities are settled.

2. Installment liquidation – the partners’ claims are


settled on an installment basis as non-cash assets
are realized and as cash becomes available, but
only after all liabilities are fully settled.
Chapter 14: Partnership Liquidation (FAR
by: Millan)
Settlement of claims

• The available cash of the partnership is used


to settle claims in the following descending
order:
1. First, to outside creditors;
2. Second, to inside creditors (e.g., payables to
partners);
3. Third, to owners’ interests

Chapter 14: Partnership Liquidation (FAR


by: Millan)
Lump-sum vs. Installment liquidation
The following procedures shall be observed when accounting for lump-
sum liquidation or installment liquidation:

Chapter 14: Partnership Liquidation (FAR


by: Millan)
Lump-sum vs. Installment liquidation (Cont’n.)

Chapter 14: Partnership Liquidation (FAR


by: Millan)
Marshalling of assets

• A partner who is solvent, shall be required to make


additional contributions to settle any deficiency in
his capital balance, subject to the following order
of priority over his personal assets:
1. The partner’s separate creditors
2. The partnership creditors
3. To the other partners by way of contribution

• The capital deficiency of an insolvent partner shall


be offset to the capital credits of the other
partners.
Chapter 14: Partnership Liquidation (FAR
by: Millan)
OPEN FORUM
QUESTIONS????
REACTIONS!!!!!

Chapter 14: Partnership Liquidation (FAR


by: Millan)
END

Chapter 14: Partnership Liquidation (FAR


by: Millan)

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