Accounting 2 · Chapter 12 · Free

Chapter 12 — Accounting for Partnerships

How a partnership works from first day to last — forming it and opening the capital accounts, dividing net income with salary and interest allowances, admitting and withdrawing partners with the bonus method, and liquidating the partnership step by step.

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What you'll learn

Explain what a partnership is — co-ownership, limited life, unlimited liability and mutual agency — and how LPs, LLPs and LLCs differ
Record the formation of a partnership, with contributed assets at fair value and each partner's capital account
Divide partnership net income (or a net loss) using salary allowances, interest allowances and the income ratio, and close the year
Record the admission of a partner by purchase of an interest or by investment of assets, including the bonus to old or new partners
Record the withdrawal or death of a partner, paid from partners' personal assets or from partnership assets
Liquidate a partnership in four steps — sell, allocate the gain or loss, pay creditors, then pay partners by capital balance — including a capital deficiency

Lecture

Full lecture (multi-part)

Part 1 — What a Partnership Is, and Forming One

Part 2 — Division of Partnership Net Income and Closing Entries

Part 3 — Admitting a New Partner: Purchase vs Investment, and Who Gets the Bonus

Part 4 — Withdrawal and Death of a Partner

Part 5 — Partnership Liquidation: Who Gets the Cash?

Chapter downloads

How to get the most out of this chapter

Watch the full lecture above.
When you're ready, move on to Chapter 13.

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