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Chapter 13 - Partnership Dissolution

This document discusses partnership dissolution in 3 chapters. It begins by defining dissolution as a change in the relationship between partners. It then lists the main causes of dissolution as the admission, withdrawal, retirement, death, or incorporation of a partner. The document explains the accounting treatment for different types of admissions, withdrawals, retirements, and deaths of partners. It states that assets and liabilities are restated to fair value upon dissolution. The final chapter leaves room for discussion of applying the dissolution concepts.

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Villanueva, Jane G.
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601 views13 pages

Chapter 13 - Partnership Dissolution

This document discusses partnership dissolution in 3 chapters. It begins by defining dissolution as a change in the relationship between partners. It then lists the main causes of dissolution as the admission, withdrawal, retirement, death, or incorporation of a partner. The document explains the accounting treatment for different types of admissions, withdrawals, retirements, and deaths of partners. It states that assets and liabilities are restated to fair value upon dissolution. The final chapter leaves room for discussion of applying the dissolution concepts.

Uploaded by

Villanueva, Jane G.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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FINANCIAL ACCOUNTING

&
REPORTING
(Fundamentals)

ZEUS VERNON B. MILLAN


Chapter 13: Partnership Dissolution (FAR
by: Millan)
Chapter 13
Partnership Dissolution
Learning Objectives
1. State the causes of partnership dissolution.
2. Account for the effects of partnership
dissolution on the partnership equity.

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Dissolution
• Dissolution is the change in the relation of the partners
caused by any partner ceasing to be associated in the carrying
on of the business.

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Causes of partnership dissolution
1. Admission of a partner
2. Withdrawal, retirement or death of a partner
3. Incorporation of a partnership

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Admission of partner

• The admission of a new partner may be effected either through:


1. Purchase of interest in the partnership, or
2. Investment in the partnership

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Purchase of interest

• A personal transaction between and among the partners


• Any consideration paid or received is not recorded in the
partnership books
• Only a transfer within equity is made to establish the capital
account of the new partner and decrease the capital
account(s) of the selling partner(s).
• No gain or loss shall is recognized in the partnership books.

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Revaluation of assets

• When a partnership is dissolved but not liquidated, a new


partnership is created. The assets and liabilities carried over
to the new partnership are restated to fair values.

• Any adjustment to the assets and liabilities is allocated first to


the existing partners before recording the admission of the
new partner.

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Investment in the partnership
• The incoming partner invests directly to the partnership
instead of purchasing interest from an existing partner(s).
• This is a transaction between the new partner and the
partnership. Any consideration paid by the incoming partner
is recorded in the partnership books.
• No gain or loss shall be recognized

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Withdrawal, retirement or death of a
partner
• When a partner withdraws, retires or dies, his
interest may be purchased (a) by one or all of the
remaining partners or (b) by the partnership.
• The interest of the withdrawing, retiring, or
deceased partner shall be adjusted for the
following:
a. his share of any profit or loss during the period up to
the date of his withdrawal, retirement or death; and
b. his share of any revaluation gains or losses as at the
date of his withdrawal, retirement, or death.

Chapter 13: Partnership Dissolution (FAR


by: Millan)
Withdrawal, retirement or …
(Continuation)
• Purchase by one or all of the remaining partners
This is a transaction between and among the partners (or
deceased partner’s estate). As such, the settlement amount
is not recorded in the books. The only entry to be made in
the partnership books is a transfer within equity.

• Purchase by the partnership


This is a transaction between the retiring or withdrawing
partner (or deceased partner’s estate) and the partnership.
As such, the settlement amount is recorded in the books.

Chapter 13: Partnership Dissolution (FAR


by: Millan)
APPLICATION OF
CONCEPTS
 

PROBLEM 2: FOR CLASSROOM DISCUSSION

Chapter 13: Partnership Dissolution (FAR by: Millan)


OPEN FORUM
🞂QUESTIONS????
🞂REACTIONS!!!!!

Chapter 13: Partnership Dissolution (FAR


by: Millan)
END

Chapter 13: Partnership Dissolution (FAR


by: Millan)

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