Accounting transaction for liquidating partnership
If an existing partner purchases the interest of the retiring partner, the partnership records an entry to close out the capital account balance of the retiring partner and adds the amount to the capital account balance of the partner who purchased the interest.If the partnership gives assets to the retiring partner in the amount of the partner's capital account balance, an entry is made to reduce the assets and zero out the retiring partner's capital account balance.
Therefore, it does not matter whether TLM pays ,000, ,000, or 0,000 for MJM's partnership interest, the partnership simply records the change in the partner's capital accounts using the current balance in the MJM, capital account. If TLM joins the existing partnership (becoming a third partner) by investing cash of ,000 in the partnership, the partnership must record the additional cash and establish a capital account for the new partner.Pages: 1 2 3 Allocation of Net Income Asset Contributions to Partnerships Basic Accounting For Business Partnership Business Partnership Agreement Business Partnerships Buying Out Existing Partner Changes in Partners Characteristics of a Business Partnership Existing Capital Income Allocations to The Partner Investment in the Partnership Journal Entry For Business Partnerships Limited Life Partnership Liquidation of a Partnership Management Structure and Operations Mutual Agency Partnership New Partner Number of Partners Partnership Accounting Partnerships Retirement or Withdrawal of A Partner The Statement of Partner’s Capital To Record Investment Transfer of Ownership Unlimited Liability Partnerships Are you looking for easy accounting tutorial?Established since 2007, hosts more than 1300 articles (still growing), and has helped millions accounting student, teacher, junior accountants and small business owners, worldwide.TLM's capital account would be credited for ,000 in this case.
The ,000 difference between his initial capital balance of ,000 and his cash investment of ,000 must be deducted from the existing partners' capital account balances according to their sharing of gains and losses.
JPO’s capital account would be credited for ,000 in this case: Existing Capital LDP, Capital $ 70,000 JPO, Capital $ 45,000 The ,000 difference between his initial capital balance of ,000 and his cash investment of ,000 must be deducted from the existing partners’ capital account balances according to their sharing of gains and losses. LDP’s capital account balance would increase ,500 and LRH’s capital account balance would increase ,000. The statement of partner’s capital shows the changes in each partner’s capital account for the year or period being reported on.