In the last article, we discussed partner capital accounts, contributions, and withdrawals, as well as the allocation of periodic income. Now we’ll look at how to account for the termination of a partnership.
1. Accounting for partnership termination
All good things eventually come to an end, and partnerships are usually no different. Perhaps the business is not performing well, but even if it is, the partners may need to liquidate the investment or just want to go their separate ways. No matter the reason, the goal of partnership dissolution is to turn all assets into cash or other assets the partners are willing to accept and pay off all creditors. Anything left over goes to the partners in a manner that depends on their capital account balances.
Let’s 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. 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.
For more click here:-
Basics of partnership accounting (Part II)
1. Accounting for partnership termination
All good things eventually come to an end, and partnerships are usually no different. Perhaps the business is not performing well, but even if it is, the partners may need to liquidate the investment or just want to go their separate ways. No matter the reason, the goal of partnership dissolution is to turn all assets into cash or other assets the partners are willing to accept and pay off all creditors. Anything left over goes to the partners in a manner that depends on their capital account balances.
Let’s 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. 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.
For more click here:-
Basics of partnership accounting (Part II)
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