COLLEGE OF COMMERCE
MODULE 4 PACKET
AE 13 – PARTNERSHIP & CORPORATION ACCOUNTING
MODULE 4 OVERVIEW:
Welcome to Module 4 – PARTNERSHIP LIQUIDATION
In this module, we will discuss the causes of partnership dissolution and account for the effects of
partnership dissolution on the partnership equity. At the end of this module, you are going to
answer an assessment to apply the lessons you learned from this module.
CONSULTATION HOURS:
Phone or Messenger:
Virtual time: Class schedule
MODULE 4 LEARNING OBJECTIVES:
By the end of this module, the students will be able to:
1. Enumerate the procedures in partnership liquidation
2. Journalize the entries pertinent to lump-sum and installment liquidation
3. Prepare the Statement of Liquidation with supporting schedules
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COURSE CONTENT FOR MODULE 4:
PARTNERSHIP LIQUIDATION
ACTIVITY DESCRIPTION TIME TO COMPLETE
Lecture discussions Partnership Liquidation 2 hours
Activity Giving instructions for the activity 15 minutes
Quiz Summative quiz for Module 4 1 hour
LECTURE DISCUSSIONS
PARTNERSHIP LIQUIDATION
• Liquidation is the termination of business operations or the winding up of affairs. It is a
process by which
a. the assets of the business are converted into cash,
b. the liabilities of the business are settled, and
c. any remaining amount is distributed to the owners.
TYPES OF PARTNERSHIP LIQUIDATION
1. Lump-sum liquidation – the partners’ claims are settled in a single, lump-sum payment
after all non-cash assets are realized and after all liabilities are settled.
2. Installment liquidation – the partners’ claims are settled on an installment basis as non-
cash assets are realized and as cash becomes available, but only after all liabilities are
fully settled.
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SETTLEMENT OF CLAIMS
The available cash of the partnership is used to settle claims in the following
descending order:
1. First, to outside creditors;
2. Second, to inside creditors (e.g., payables to partners);
3. Third, to owners’ interests
LUMPSUM vs INSTALLMENT LIQUIDATION
The following procedures shall be observed when accounting for lump-sum liquidation or
installment liquidation:
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MARSHALLING OF ASSETS
A partner who is solvent, shall be required to make additional contributions to settle any
deficiency in his capital balance, subject to the following order of priority over his personal
assets:
1. The partner’s separate creditors
2. The partnership creditors
3. To the other partners by way of contribution
4. The capital deficiency of an insolvent partner shall be offset to the capital credits of
the other partners.
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Illustration
LUMP-SUM METHOD
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Solution:
1.Statement of Liquidation
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2.Journal Entries
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INSTALLMENT METHOD
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Activity 4-1 Statement of Liquidation
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Activity 4-2
Activity 4-3 Multiple Choice Questions/Problems. Please answer directly in the Neo LMS.
Summative Quiz- Module 4
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REFERENCES:
Aduana, Nick L. (2016). Partnership and Corporation
Accounting (A Procedural Approach). Quezon City:
C & E Publishing, Inc.
Ballada, Win Lu, Susan Ballada. (2019). Partnership
and Corporation Accounting. 21st Edition. Manila:
Domdane Publishers and Made Easy Books.
Guerrero, Pedro, Jose Peralta. (2017). Advanced
Accounting Principles and Procedural Applications
Volume 1. Manila: GIC Enterprises & Co., Inc. C.M
Recto Avenue.
Palma, Roberto. (2014). Basic Accounting 2:
Partnership and Corporation. First Edition. Manila:
Rex Book Store, Inc.
Printed Learning Resources Dayag, Antonio J. (2019). Advanced Financial
Accounting and Reporting (Theories & Problems).
2017 C.M. Recto Ave.: GIC Enterprises & Co., Inc.
Guerrero, Pedro P. (2017). Practical Accounting 2 –
CPA Examination –A Comprehensive Review and
Procedural Approach. 2017 CM. Recto Ave.: GIC
Enterprises & Co., Inc.
Mejorada, Nenita D. (2015). Advanced Accounting
Part 1. Makati, Metro Manila : Goodwill Trading
Co.,Inc.
Compilation of Philippine Accounting Standards
(PAS), Philippine Financial Reporting Standards
( PFRS), International Financial Reporting
Standards (IFRS).
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Partnership Liquidation. Retrieved from
https://www.coursehero.com/sg/principles-of-
accounting/partnership-liquidation/
Farhat’s Accounting Lectures. Introduction to
Partnership Liquidation. Retrieved from
https://www.youtube.com/watch?v=rIf5ou1SJVo
Web and other Learning Resources Mr. Accounting. AFAR: Partnership Liquidation (Lump
Sum). Retrieved from
https://www.youtube.com/watch?v=h2JlOKSRuHg
Mr. Accounting. AFAR: Partnership Liquidation
(Installment). Retrieved from
https://www.youtube.com/watch?v=h2JlOKSRuHg
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