Chapter 12 Partnerships

Image via Wikipedia What is a Partnership? A partnership is an unincorporated business form consisting of two or more persons conducting business as co-owners for profit. What is a General Partner? A general partner is the partner who assumes unlimited liability in the partnership; as such the partner is personally liable for the debts of the partnership. What is a Limited Partner? A limited partner is a partner who has limited liability for the debts of the company; usually up to, and not exceed the amount of the partner’s investment in the business. What is a Limited Partnership? A limited partnership is a partnership in which the limited partners have limited liability. However, the partnership must have at least one general partner with unlimited liability. What is a Limited Liability Company—LLC? An LLC is a type of partnership that is usually organized for a limited period of time, with one or more general partners, and limited partners called members. What is a Limited Liability Partnership? A LLP is a partnership of professionals organized to protect the limited partners from unlimited liability, such as legal suits for malpractice. What is Income (and Loss) Ratio? The income ratio is the percentage or proportion used for dividing net income and net loss in a partnership. What is Partnership Liquidation? Liquidation is the winding up process when a partnership goes out of business. Schedule of Cash Payments Is a schedule that shows the distribution of cash to the partners in partnership liquidation. What is Partnership Dissolution? A partnership occurs when a new partner is accepted or when an existing partner leaves the company. However, such actions do not necessarily terminate the business, since in most cases the operating partners will opt to go on. What is Capital Deficiency? Capital Deficiency is the debit balance in the owner’s equity account of a partner. What is No Capital Deficiency? No Capital Deficiency occurs when all the partners’ capital accounts show credit balances. What is a Partnership Agreement? The partnership agreement is the formal written contract that creates a partnership. What is Realization? Realization is the sale of assets when a partnership is being liquidated. What is a Statement of Partnership Equity? It is a summary of the changes that have occurred—during a specific period of time—in each partner’s capital account. This statement is also called “Partners’ Capital Statement.” What is Admission by Investment? Admission by Investment occurs when a new partner joins the business by investing assets in the partnership, causing the total capital to increase. What is Admission by Purchase of an Interest? A new partner may buy an existing partner’s interest in the business, in a personal transaction. The total assets and total capital remain unchanged. What is Withdrawal by Payment from Partners’ Personal Assets? This situation occurs when a partner is bought out—and paid—by the other partners in a personal transaction, causing no change in either total assets or total capital. What is Withdrawal by Payment from Partnership Assets? This situation occurs when the withdrawing partner is paid with assets of the partnership, causing the total assets and total capital to decrease. Ch1 Accounting in Action Ch2 Recording Process Ch3 Adjusting the Accounts Ch4 Completing the Accounting Cycle Ch5 Merchandising Operations Ch6 Inventories Ch7 Accounting Information Systems Ch8 Internal Control and Cash Ch9 Accounting for Receivables Ch10 PP&E, Natural Resources, and Intangible Assets Ch11 Current Liabilities and Payroll Ch12 Partnerships Ch13 Corporations Ch14 Corporations:Dividends, RE Ch15 Long Term Liabilities Ch16 Investment Ch17 Statement of Cash Flows Ch18 Financial Statement Analysis Plato and Accounting Price/Earnings Ratio Plant Assets Luca Pacioli and DaVinci The secrets of 'no-doze' prose: Mary Duffy's Sentence Openers

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