Process of Liquidation:
1. Convert any non-cash assets into cash.
2. Pay liquidation expenses.
3. Pay outside creditors.
4. Pay partner’s interest
Interest of the partner:
1. Capital balance + Loan from partner
2. Capital balance - Loan to partner
*Before a partner receives his share in the final distribution of cash, he must absorb total
gain/loss.
Total interest of the partners xx
Liquidation expenses (xx)
Maximum Possible Loss (MPL) (xx)
Condoned Liability xx
Gain/Loss on Realization xx/(xx)
Total cash paid to partners xx
*If silent, partner is insolvent.
Interest of partner prior installment xx
Liquidation expenses (xx)
Cash paid to partner (xx)
Gain on Condoned Liability xx
Gain/Loss on Realization xx/(xx)
Interest of partner next installment xx
Installment - if there is deficiency, apply the net assets of the partner only at the last installment.
Future liquidation expenses xx
Unpaid balance of outside creditors xx
Total cash withheld xx
Cash withheld = Future liquidation expenses
1. Convert any non-cash assets into cash.
2. Pay liquidation expenses.
3. Pay outside creditors.
4. Pay partner’s interest
Interest of the partner:
1. Capital balance + Loan from partner
2. Capital balance - Loan to partner
*Before a partner receives his share in the final distribution of cash, he must absorb total
gain/loss.
Total interest of the partners xx
Liquidation expenses (xx)
Maximum Possible Loss (MPL) (xx)
Condoned Liability xx
Gain/Loss on Realization xx/(xx)
Total cash paid to partners xx
*If silent, partner is insolvent.
Interest of partner prior installment xx
Liquidation expenses (xx)
Cash paid to partner (xx)
Gain on Condoned Liability xx
Gain/Loss on Realization xx/(xx)
Interest of partner next installment xx
Installment - if there is deficiency, apply the net assets of the partner only at the last installment.
Future liquidation expenses xx
Unpaid balance of outside creditors xx
Total cash withheld xx
Cash withheld = Future liquidation expenses
