Partnership liquidating distribution detailed example
Also note that the partners split up profits and losses based on ownership percentage.
These two pieces of information become critically important during the dissolution process.
Lets continue our example from Part 1 of the partnership started by Jerry, Tom, and Billy.
Throughout the dissolution examples, keep in mind the fact that Jerry has a 50% interest, Tom has a 30% interest, and Billy has a 20% interest.
Has it outlived its usefulness as an asset management, asset protection, or, dare we say it, wealth transfer vehicle?
Are you tired of discussing the company’s operations with the other owners?
If a partner invested cash in a partnership, the Cash account of the partnership is debited, and the partner's capital account is credited for the invested amount.
If a partner invested an asset other than cash, an asset account is debited, and the partner's capital account is credited for the market value of the asset.
This form of organization is popular among personal service enterprises, as well as in the legal and public accounting professions.February 3, 2014 In the last article, we discussed partner capital accounts, contributions, and withdrawals, as well as the allocation of periodic income.Now well look at how to account for the termination of a partnership.If a certain amount of money is owed for the asset, the partnership may assume liability.In that case an asset account is debited, and the partner's capital account is credited for the difference between the market value of the asset invested and liabilities assumed.