ACCT B8008 Lecture Notes - Lecture 9: Balance Sheet, Financial Statement, Accounts Payable

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30 Apr 2016
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ﻨﺳسدﻟا روﻟا ﯿﻟا ﺒﺘﻜﻣ قﻮﻓ يﻟا جﺮﺑ ﯿﻨﯿﻧا 01063936420 Mr/ Mohamed Ezzat
1
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CH (12) Accounting for partnerships Partnership from of organization
:A partnership is an association of two or more persons to carry on as co-owners of a business for
profit. Another definition: In Egypt, the civil law defines a partnership as: *Accompany between two or more persons with intention of trading as co-partner
on certain address or name of this company. "Characteristics of partnerships" It consists of five characteristics as follow : 1- Association of individual. 2- Mutual agency. 3- Limited life. 4- Unlimited liability. 5- Co-ownership of property. :individuals(1) Association of * A partnership is a legal entity and also an accounting entity. Thus, the personal
asset, liabilities, and transaction of partners are excluded from the accounting
recorded of the partnership. * A partnership unlike corporation doesn't pay income tax but each partner pays tax
on his or her share of the partner ships taxable income. "his personal tax rate
depends on his income. Agency:(2) Mutual Each partner acts as an agent of the partnership with authority of contract for
purchase, sales of goods and services within the scope of normal operation the act of
any partner is binding on all other partners.
(3) Limited life: According to partnership contract it possible to be ended at any time by admission
of new partner or retirement of a partner, and also death of any partner.
(4) Unlimited liability: * Each partner is personal for all partnership liabilities "debts claims". * If partnership assets are insufficient to pay its creditors the creditors claims take
from personal resources of any partners. ownership of partnership property:-(5) Co A partner invested Assets like Building, Inventory or other property in partnership
he or she doesn't retain any personal right to asset contributed, the property
becomes jointly owned by all partners according to his/her share on capital.
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ﻨﺳسدﻟا روﻟا ﯿﻟا ﺒﺘﻜﻣ قﻮﻓ يﻟا جﺮﺑ ﯿﻨﯿﻧا 01063936420 Mr/ Mohamed Ezzat
2
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*Advantages and disadvantages of partnership*
*Advantages: (1) Combining skills and resources of two or more persons. (2) Easy of formation. (3) Freedom from government regulations and restrictions like "tax". (4) Each partner has all power and authority. (5) Sharing profit and losses. *Disadvantages: (1) Mutual agency. (2) The life of partnership is limited. (3) The partners have unlimited liability. *The partnership Agreement*
*The agreement of two or more person to from a partnership should be expressed in
a written contract called "partnership" agreement". *The partnership agreement contains basic information as name and address of
company and purpose and date of inception.
Some specify relationship among the partners: (1) Name and capital contributions of partner. (2) Rights and duties of partner. (3) Share of wet income and vet loss. (4) Provision for withdrawals of assets. (5) Procedures for submitting disputes to arbitration. (6) Procedures for withdrawals or addition of partner. (7) Right and duties of surviving partners in the event of partners death.
*artnership AccountingP*Basic
The major accounting issues related to: (1) Forming the partnership. (2) Dividing income and loss. (3) Preparing financial statement. : (1) Forming a partnership There is more than one ways to form partnership, partner may pay their shares in
cash (Assets) a group of assets and liabilities or in transfer an exiting sole
proprietorship to partnership. (A) By cash: Forming a partnership using cash is considered as the simplest and most clear-cut
case in partnership formation. Ex: "A"and"B" form a partnership and each partner according to the partnership
agreement, contributes L.E50000 cash.
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