Scribd
Upload
152 views4 pages

AFAR - Points To Remember

Uploaded by

colandogangela18
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
152 views4 pages

AFAR - Points To Remember

Uploaded by

colandogangela18
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

PARTNERSHIP

A. FORMATION
1. closing of temporary withdrawals @ year-end  to capital account
2. advances to partners (pship receivable) vs. advances from partners (pship liability)
3. capital ratio vs. profit ratio
4. NCA measurement hierarchy: (AFAC)
i. agreed value
ii. FMV
iii. appraised value
iv. carrying value/BV
5. services = memo entry
6. TCC = TAC  full investment approach / bonus method
TCC > TAC
TCC < TAC
7. Industrial partner = GR: NO share in net LOSS;
except: if waived
profit = i. agreement
ii. just and equitable share
8. accumulated depreciation = NOT carried forward  0

B. OPERATION
1. salaries and interest = time proportioned
2. bonus  basis: positive
3. if B/I/S = profit distribution, (NY = before deduction of B/I/S)
if B/I/S = treated as expense, (NY = after deduction of B/I/S)
 share in NY = no B/I/S
 total income in partnership = included B/I/S
o share in NY = B/I/S is not included in computation
o capital balance = B/I/S is included in computation

4. Beginning Capital Total adjusted capital


add: Additional investments add: adjusted liabilities
less: Capital withdrawals (permanent) Total Assets
Ending Capital after closing
5. Weighted Average Capital computation: let “n” be:
Investment (Permanent Withdrawal) no. of months to 12/31 Total
xx (xx) n/12 xxx

6. “WAC” vs “Annual WAC”


**illustration: March to December
WAC = n/10 x interest% x 10/12
AWAC = n/12 x interest%
7. if remainder = negative:
i. agreement
ii. loss ratio
iii. profit ratio
8. allocation of profit (order of priority; insofar as available)
upto extent of NY only (no remainder)
9. if silent, bonus = before S/I/B
10. if 2 years:
Year 2
Y2 (A-L)  ending beginning  Y1
Y1 + Y2  permanent drawings additional investments  Y1 + Y2
Net Income, Y1 & Y2 (cumulative)
divide by : 2 = NY per year (for profit distribution)
11. if bonus% = separated (2 or more partners)
 add both, one computation only; then divide accordingly to P/L ratio
12. if there is minimum amount for share in NY:
 NY is given = squeeze
 NY is being asked = allocate to other partners
13. after allocation of allowances (problem 25 PDJ)
14. if there are 2 options (problem 12 & 13 PDJ)

C. DISSOLUTION
1. ADMISSION OF A PARTNER
(i) No Dissolution - Assignment of Interest
A(80%) B(20%) C(¼) TOTAL
ax bx xxx
(¼ax) ¼ax 0
axx bxx cxx xxx

(ii) Dissolution - Admission by Purchase [“purchased”, “invests but money goes to original partners” ]
A(80%) B(20%) C(¼) TOTAL
ax bx xxx
(¼ax) (¼bx) ¼ab 0
axx bxx cxx xxx

**revaluation/adjustments are recognized


A(80%) B(20%) C(¼) TOTAL paid by C
ax bx xxx  x 1/4 = C’s interest (C’s interest)
reval80% reval20% revaluation gain ➗ ¼ = revaluation

axx bxx xxx ***if loss = no revaluation (0)


(¼ax) (¼bx) cash paid 0
axx bxx cxx xxx
(iii) Dissolution - Admission by Investment
A(80%) B(20%) C(¼) TOTAL
TIC ax bx invested xxx
bonus -- + bonus 80% ; 20% -- + diff 0
TAC axx bxx ¼xxx xxx

2. RETIREMENT OF A PARTNER
o sell to outsider
o sell to remaining partner(s)
o sell to the partnership
interest of retiring partner:
 capital balance (addtl investement & withdrawals)
 P/L from last closing
 loans and advances to (from ) the partnership
 correction of accounting errors
 revaluation of pship assets

3. DEATH OR INCAPACITY OF A PARTNER


4. INCORPORATION OF PARTNERSHIP

You might also like