MODULE 1: PARTERSHIP FORMATION KINDS AND CLASSIFICATIONS OF

PARTNERSHIP
PARTNERSHIP
 A contract whereby two or more As to:
persons bind themselves two or more ACTIVITY
persons bind themselves to a. Service
contribute money, property, or b. Merchandising
industry into a common fund with the c. Manufacturing
intention of diving the profits among
themselves OBJECT
 Only natural persons can form a a. Universal Partnership
PARTNERSHIP b. Particular Partnership
 Association of 2 or more natural
persons LIABILITY OF PARTNERSHIP
 Combines: a. General Partnership
o Capital (money/property) b. Limited Partnership
o Talent (special skills)
o Experience DURATION
o Business (sole prop) a. Partnership at Will
b. Partnership with a Fixed Term
ARTICLES OF CO-PARTNERSHIP
 Name, location and nature of the REPRESENTATION TO OTHERS
business a. Ordinary Partnership
 Name, amount of investment and b. Partnership by Estoppel (anything na
duties of each partner nadengoy ka)
 Manner new partner is admitted
 Manner profits and losses are divided LEGALITY OF EXISTENCE
 Withdrawals of assets by the partners a. De Jure partnership - may certificate
 Manner of settling a retiring business of registration dahil kumpleto and
 Manner of liquidating the business requirements
b. De Facto partnership - wala siyang
CHARACTERISTICS OF A PARTNERSHIP certificate of registration
 Limited Life
 Mutual Agency PUBLICITY
o Anyone of the partners can a. Secret Partnership
represent the business b. Open Partnership
 Unlimited Liability
 Co-Ownership of Property KINDS AND CLASSIFICATIONS OF PARTNERS
o Pag-nag invest ng pera sa
partnership, and pera ay nasa As to
partnership na CONTRIBUTION
 Mutual Participation in Profits  Capitalist Partner (money, property)
o Agreed paghahati ng profits  Industrial Partner (special skills and
 Legal Personality talent)
o Registered under SEC  Capital-Industrial Partner (money,
 Subject to Income Taxation property and special skills)

LIABILITY
 General Partner
 Limited Partner
 MANAGEMENT PARTNERSHIP OPERATION
 Managing Partner - isa lang ang
pwedeng managing partner ACCOUNTING CYCLE, PARTNERSHIP
 Silent Partner  Not significantly different from sole
prop
OTHER CLASSIFICATIONS
 Liquidating partner RULES; DIVISION OF PROFITS & LOSSES
 Nominal partner - partner in NAME
only Capitalist
 Ostensible partner Profits
 Secret partner  According to agreement
 Dormant partner  According to capital contribution if no
agreement
ACCOUNTING FOR PARTNER'S INVESTMENT Losses
 According to agreement
ASSETS invested by the partners LIABILITIES  If agreement is only for profits, the
assumed by the partnership at RECORDED in same will apply to losses
the books of the partnership at AGREED  According to capital contribution if no
VALUES (Old equipment) at DATE OF agreement
INVESTMENT
Industrialist
PARTNERSHIP FORMATION Profits
1. Two ore more individuals  Agreement
2. Individual and an existing sole  JUST AND EQUITABLE SHARE if there
proprietor is no agreement
Choices Losses
 Use the books of accounts of the sole  No share
prop
Steps: Capitalist-Industrial
 Adjust sole prop book of accounts and Two-personality
then record the investment of the Will share in the profits both as a
individual capitalist and industrialist
 Use a new set of book of accounts
 Adjust and Close the books of MODES OF DIVIDING PROFITS & LOSSES
accounts of the sole prop 1. Equal distribution
 Transfer the assets and 2. Arbitrary Ratio (%, decimal, fraction)
liabilities of the sole 3. Capital Ratio (original, beginning,
proprietor into the new books ending, average)
of the partnership 4. Interest in Capital and balance on
 Record the investment of the agreed ration
individual 5. Salary allowances and balance on
3. Two or more sole proprietors agreed ration
6. Bonus to Managing Partner .....

Closing Entry for a Sole Proprietorship