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Define partnership accounting?

Open uri20170510 32134 ughyv5?1494421703 gunesh asked over 2 years ago

Hi, What is partnership accounting?

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 acharya answered over 2 years ago

Contribution of other than funds. When a partner invests some other asset in a partnership, the transaction involves a debit to whatever asset account most closely reflects the nature of the contribution, and a credit to the partner's capital account. The valuation assigned to this transaction is the market value of the contributed asset. ◾Withdrawal of funds. When a partner extracts funds from a business, it involves a credit to the cash account and a debit to the partner's capital account. ◾Withdrawal of assets. When a partner extracts assets other than cash from a business, it involves a credit to the account in which the asset was recorded, and a debit to the partner's capital account.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

> Define partnership accounting? **--Partnership** An association of two or more persons engaged in a business enterprise in which the profits and losses are shared proportionally. The legal definition of a partnership is generally stated as "an association of two or more persons to carry on as co-owners a business for profit" **--Partnership Accounting** Under certain circumstances a partner has a right to demand an accounting of the partnership's affairs. The partnership agreement, if any, usually sets forth a partner's right to a predissolution accounting. State law also generally allows for an accounting if copartners exclude a partner from the partnership business or if copartners wrongfully possess partnership property. In a court action for an accounting, the partners must provide a report of the partnership business and detail any transactions dealing with partnership property. In addition, the partners who bring a court action for an accounting may examine whether any partners have breached their duties to copartners or the partnership.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered over 2 years ago

Accounting for a Partnership There are several distinct transactions associated with a partnership that are not found in other types of business organization. These transactions are: ◾Contribution of funds. When a partner invests funds in a partnership, the transaction involves a debit to the cash account and a credit to a separate capital account. A capital account records the balance of the investments from and distributions to a partner. To avoid the commingling of information, it is customary to have a separate capital account for each partner. ◾Contribution of other than funds. When a partner invests some other asset in a partnership, the transaction involves a debit to whatever asset account most closely reflects the nature of the contribution, and a credit to the partner's capital account. The valuation assigned to this transaction is the market value of the contributed asset. ◾Withdrawal of funds. When a partner extracts funds from a business, it involves a credit to the cash account and a debit to the partner's capital account. ◾Withdrawal of assets. When a partner extracts assets other than cash from a business, it involves a credit to the account in which the asset was recorded, and a debit to the partner's capital account. ◾Allocation of profit or loss. When a partnership closes its books for an accounting period, the net profit or loss for the period is summarized in a temporary equity account called the income summary account. This profit or loss is then allocated to the capital accounts of each partner based on their proportional ownership interests in the business. For example, if there is a profit in the income summary account, then the allocation is a debit to the income summary account and a credit to each capital account. Conversely, if there is a loss in the income summary account, then the allocation is a credit to the income summary account and a debit to each capital account. ◾Tax reporting. In the United States, a partnership must issue a Schedule K-1 to each of its partners at the end of its tax year. This schedule contains the amount of profit or loss allocated to each partner, and which the partners use in their reporting of personal income earned. Distributions to partners may be extracted directly from their capital accounts, or they may first be recorded in a drawing account, which is a temporary account whose balance is later shifted into the capital account. The net effect is the same, whether a drawing account is used or not.

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