Definition of Partnership:
1. It consists of 2 or more persons
2. Bind themselves to contribute money, property, and service to a common fund
3. Intention is to divide the profits
How will the contributed asset be recorded in the new partnership books?
1, Agreed value
2. In the absence of Agreed value, use Fair/Appraised value
How will the liabilities of the existing sole proprietors be included in the new partnership
books?
1. When those liabilities are assumed by the partnership.
2. Silent: Not assumed by the partnership.
Contributed Asset (Agreed/FMV/ Appraised) xx
Liabilities assumed by the partnership (xx)
Contributed Capital xx
Total Agreed Capital xx
x Capital Interest Ratio Agreement x%
Capital Credit xx
Capital Credit:
1. Capital of each partner after formation
2. Always based on the Agreed Capital
3. Silent: Contributed Capital = Capital Credit
1. It consists of 2 or more persons
2. Bind themselves to contribute money, property, and service to a common fund
3. Intention is to divide the profits
How will the contributed asset be recorded in the new partnership books?
1, Agreed value
2. In the absence of Agreed value, use Fair/Appraised value
How will the liabilities of the existing sole proprietors be included in the new partnership
books?
1. When those liabilities are assumed by the partnership.
2. Silent: Not assumed by the partnership.
Contributed Asset (Agreed/FMV/ Appraised) xx
Liabilities assumed by the partnership (xx)
Contributed Capital xx
Total Agreed Capital xx
x Capital Interest Ratio Agreement x%
Capital Credit xx
Capital Credit:
1. Capital of each partner after formation
2. Always based on the Agreed Capital
3. Silent: Contributed Capital = Capital Credit
