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Accounting for
Partnerships
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After studying this chapter, you should
be able to:
1. Describe the basic characteristics of
proprietorships, partnerships, and
limited liability companies.
2. Describe and illustrate the accounting
for forming a partnership and for
dividing the net income and net loss
of a partnership.
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After studying this chapter, you should
be able to:
3. Describe and illustrate the accounting
for partner admission and withdrawal.
4. Describe and illustrate the accounting
for liquidating a partnership.
5. Prepare the statement of partnership
equity.
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Objective 1
12-1
Describe the basic
characteristics of
proprietorships,
partnerships, and limited
liability companies.
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Proprietorship
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12-1
A proprietorship is a business
enterprise owned by a single individual.
Advantages
Disadvantages
• Simple to form
• Difficulty in raising
large amounts of capital
• Ability to be one’s own
boss
• Unlimited liability
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Partnership
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12-1
A partnership is an association of
two or more individuals who own
and manage a business for profit.
Advantages
• More financial
resources than a
proprietorship
• Additional
management skills
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•
•
•
Disadvantages
Limited life
Unlimited liability
Co-ownership of
partnership property
Mutual agency
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Partnership
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12-1
 An important right of partners is to
participate in the income of the
partnership.
 A partnership, like a proprietorship, is a
nontaxable entity.
 A partnership is created by a contract,
known as the partnership agreement or
articles of partnership.
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CV (Commonditaire
Vennootschap)
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12-1
In Indonesia, Limited Partnership is called CV
(Commonditaire vennootschap). CV is a
partnership consisting of one or more (active
partner) and one or more silent partner (or
passive partner). Example = CV Cemara
Group Indonesia in Medan that sells palm oil,
coconut, and spices.
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Firma
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12-1
Firma is another common form of partnership
in Indonesia. Firma or abbreviated as Fa is
widely used for professional firm such as law
firm or accounting firm. The example of a
accounting firm is KAP Purwantono, Sarwoko
and Sandjaja, and accounting firm affiliated
with Ernst and Young which is about 17
partners in the firm.
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Characteristics of
Proprietorships, Partnerships,
and CV and firma
12-1
Ease of Formation
Proprietorship
Partnership
CV and Firma
Simple
Moderate
Moderate
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Characteristics of
Proprietorships, Partnerships, CV
and Firma
12-1
Legal Liability
Proprietorship
Partnership
CV and Firma
No limitation
No limitation
Limited liability
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Characteristics of
Proprietorships, Partnerships, CV
and Firma
12-1
Taxation
Proprietorship
Partnership
CV and Firma
Nontaxable*
Nontaxable*
Nontaxable**
*Pass-through entity
**Pass-through entity by election
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Characteristics of
Proprietorships, Partnerships, CV
and Firma
12-1
Limitation on Life of Entity
Proprietorship
Partnership
CV and Firma
Yes
Yes
Yes
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Characteristics of
Proprietorships, Partnerships, CV
and Firma
12-1
Access to Capital
Proprietorship
Partnership
CV and Firma
Limited
Limited
Limited
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Objective 2
12-2
Describe and illustrate the
accounting for forming a
partnership and for dividing
the net income and net loss
of a partnership.
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Forming a Partnership
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12-2
Joko Suhendro and Endang Fauzi agree to
combine their hardware businesses in a
partnership. Each is to contribute certain
amounts of cash and other assets. They
also agree that the partnership is to assume
the liabilities of the separate businesses.
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12-2
Joko’ Transfer of Assets, Liability, and Equity
Apr. 1 Cash
Accounts Receivable
Merchandise Inventory
Store Equipment
Office Equipment
Allowance for Doubtful Accounts
Accounts Payable
Joko Suhendro, Capital
7 200
16 300
28 700
5 400
1 500
000
000
000
000
000
1 500 000
2 600 000
55 000 000
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12-2
A similar entry would record the assets
contributed and the liabilities
transferred by Fauzi. In each entry, the
noncash assets are recorded at values
agreed upon by the partners. These
values normally represent current
market values.
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12-2
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Example Exercise 12-1
Riana Hasibuan contributed equipment, inventory, and
Rp34,000,000 cash to a partnership. The equipment had a
book value of Rp23,000,000 and market value of
Rp29,000,000. The inventory had a book value of
Rp60,000,000 but only had a market value of
Rp15,000,000 due to obsolescence. The partnership also
assumed a Rp12,000,000 note payable owed by Howell
that was used originally to purchase the equipment.
Provide the journal entry for Hasibuan’s contribution to
the partnership.
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12-2
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Follow My Example 12-1
Cash
34,000,000
Inventory
15,000,000
Equipment
29,000,000
Notes Payable
12,000,000
Riana Hasibuan, Capital
66,000,000
For Practice: PE 12-1A, PE 12-1B
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Dividing Income—Services of
Partners
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12-2
The partnership agreement of Jamila Sari and
Chandra Mono provides for Sari to receive a
monthly allowance of Rp 5,000,000 (Rp
60,000,000 annually) and Mono is to receive
Rp 4,000,000 a month (Rp 48,000,000
annually). If there is any remaining net
income, it is to be divided equally. The firm
had a net income of Rp 150,000,000 for the
year.
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12-2
Division of Net Income
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J. Sari
C. Mono
Total
Annual salary allowance
Remaining income
Rp 60,000,000 Rp48,000,000 Rp 108,000,000
21,000,000
21,000,000
42,000,000
Division of net income
Rp 81,000,000 Rp69,000,000 Rp 150,000,000
to journal entry
(Slide 24)
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12-2
The entry for dividing net income is as follows:
Dec. 31 Income Summary
150 000 000
Jamila Sari, Capital
81 000 000
Chandra Mono, Capital
69 000 000
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Dividing Income—Services of
Partners and Investments
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12-2
The partnership agreement for Sari and Mono
divides income as follows:
1. Monthly salary allowance of Rp 5,000,000 for
Stone and Rp 4,000,000 for Mills.
2. Interest of 12% on each partner’s capital
balance on January 1.
3. If there is any remaining net income, it is to be
divided equally between the partners.
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Division of Net Income
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12-2
Net income of Rp 150,000,000 is divided.
J. Sari
Salary allowance
Interest allowance
C. Mono
Rp60,000,000 Rp48,000,000
19,200,000
14,400,000
Total
Rp108,000,000
33,600,000
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Division of Net Income
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12-2
Net income of Rp 150,000,000 is divided.
J. Sari
Salary allowance
Interest allowance
C. Mills
Total
Rp 60,000,000 Rp 48,000,000 Rp108,000,000
19,200,000
14,400,000
33,600,000
12% x Sari’s
capital account
balance on Jan. 1 of
Rp 160,000,000
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Division of Net Income
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12-2
Net income of Rp 150,000,000 is divided.
J. Sari
Salary allowance
Interest allowance
C. Mono
Total
Rp 60,000,000 Rp 48,000,000 Rp 108,000,000
19,200,000
14,400,000
33,600,000
12% x Mono’s
capital account
balance on Jan. 1 of
Rp120,000,000
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Division of Net Income
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12-2
Net income of Rp 150,000,000 is divided.
J. Sari
Salary allowance
Interest allowance
Remaining income
C. Mono
Total
Rp 60,000,000 Rp48,000,000 Rp108,000,000
19,200,000
14,400,000
33,600,000
4,200,000
4,200,000
8,400,000
Division of net income Rp 83,400,000 Rp66,600,000 Rp150,000,000
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12-2
The entry for dividing net income is as follows:
Dec. 31 Income Summary
Jamila Sari, Capital
Chandra Mono, Capital
150 000 00
83 400 00
66 600 00
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Partnership Alternative
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12-2
The entry for dividing net income is as follows:
Dec. 31 Income Summary
150 000 00
Jamila Sari, Member Equity
83 400 00
Chandra Mono, Member Equity
66 600 00
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Dividing Income—Allowances
Exceed Net Income
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12-2
Assume the same facts as
before except that the net
income is only
Rp100,000,000.
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12-2
Division of Net Income
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Net income of Rp100,000,000 is divided.
J. Sari
Salary allowance
Interest allowance
Total
C. Mono
Total
Rp60,000,000 Rp48,000,000 Rp108,000,000
19,200,000
14,400,000
33,600,000
Rp79,200,000 Rp62,400,000 Rp141,600,000
This amount exceeds net
income by
Rp41,600,000.
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Division of Net Income
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Net income of Rp100,000,000 is
divided.
J.Sari
C. Mono
12-2
Total
Salary allowance
Rp60,000,000 Rp48,000,000 Rp108,000,000
Interest allowance
19,200,000
14,400,000
33,600,000
Total
Rp79,200,000 Rp62,400,000 Rp141,600,000
Deduct excess of
allowance over income
20,800,000
20,800,000 <41,600,000>
Net income
Rp58,400,000 Rp41,600,000 Rp100,000,000
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12-2
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Example Exercise 12-2
Steven Pamungkas and Cinta Bimantara formed a
partnership, dividing income as follows:
1. Annual salary allowance to Prince of Rp42,000,000.
2. Interest of 9% on each partner’s capital balance on
January 1.
3. Any remaining net income divided equally.
Pamungkas and Bimantara had Rp20,000,000 and
Rp150,000,000 in their January 1 capital balances,
respectively. Net income for the year was Rp240,000,000.
How much net income should be distributed to Pamungkas?
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12-2
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Follow My Example 12-2
Monthly salary
Rp 42,000,000
Interest (9% x Rp20,000,000)
1,800,000
Remaining income
91,350,000*
Total distributed to Pamungkas Rp135,150,000
*(Rp240,000,000 – Rp42,000,000 – Rp1,800,000 –
Rp13,500,000) x 50%
For Practice: PE 12-2A, PE 12-2B
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Objective 3
12-3
Describe and illustrate
the accounting for
partner admission
and withdrawal.
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Admitting a Partner
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12-3
A person may be admitted to a partnership
only with the consent of all the current
partners by:
1. Purchasing an interest from one or more
of the current partners.
2. Contributing assets to the partnership.
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Purchasing an Interest in a
Partnership
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12-3
Partners Toni Asikin and Nani Bunga
have capital balances of
Rp50,000,000 each. On June 1, each
sells one-fifth of his equity to Joko
Cahyadi for Rp10,000,000 in cash.
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12-3
The only entry required in the partnership
accounts is as follows:
June 1 Toni Asikin, Capital
Nani Bunga, Capital
Joko Cahyadi, Capital
10 000 000
10 000 000
20 000 000
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12-3
The effect of the transaction on the partnership
accounts is presented in the following diagram:
Partnership Accounts
Asikin, Capital
50,000,000
10,000,000
Cahyadi, Capital
20,000,000
Bunga, Capital
10,000,000
50,000,000
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Contributing Assets to a
Partnership
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12-3
Partners Dudi Lintang and Guntur
Margono have capital balances of
Rp35,000,000 and Rp25,000,000
respectively. On June 1, Suci Nadera
joins the partnership by permission and
makes an investment of Rp20,000,000
cash.
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12-3
The entry to record this transaction is as follows:
June 1 Cash
Suci Nadera, Capital
20 000 000
20 000 000
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12-3
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The effect of the transaction on the partnership
accounts is presented in the following diagram:
Partnership Accounts
Net Assets
60,000,000
20,000,000
Lintang, Capital
35,000,000
Nadera, Capital
20,000,000
Margono, Capital
25,000,000
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LLC Alternative
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June 1 Cash
Suci Nadera, Member Equity
12-3
20 000 000
20 000 000
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Revaluation of Assets
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12-3
If the asset accounts do not reflect
approximate current market values
when a new partner is admitted, the
accounts should be adjusted
(increased or decreased) before the
new partner is admitted.
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Partners Dudi Lintang and Guntur
Margono have capital balances of
Rp35,000,000 and Rp25,000,000
respectively. The balance in
Merchandise Inventory is Rp14,000,000
and the current replacement value is
Rp17,000,000. The partners share net
income equally.
12-3
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12-3
The revaluation is recorded as follows:
June 1 Merchandise Inventory
Dudi Lintang, Capital
Guntur Margono, Capital
3 000 000
1 500 000
1 500 000
Because the LLC alternative follows a pattern of
replacing “Capital” with “Member Equity,” the
LLC entry will not be shown again.
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12-3
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Example Exercise 12-3
Budi Nadera invested Rp45,000,000 in the Lestari & Kulsum
partnership for ownership equity of Rp45,000,000. Prior to
the investment land was revalued to a market value of
Rp260,000,000 from a book value of Rp200,000,000. Lila
Lestari and Tami Kulsum share net income in a 1:2 ratio.
a. Provide the journal entry for the revaluation of land.
b. Provide the journal entry to admit Nadera.
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12-3
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Follow My Example 12-3
a. Land
Lila Lestari, Capital
Tami Kulsum, Capital
60,000,000
20,000,000¹
40,000,000²
¹Rp60,000,000 x l/3
²Rp60,000,000 x 2/3
b. Cash
Budi Nadera, Capital
For Practice: PE 12-3A, PE 12-3B
45,000,000
45,000,000
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12-3
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Partner Bonuses
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12-3
On March 1, the partnership of Maryanti
Juwita and Heni Kurniasari admit Arif Dunia
as a new partner. The assets of the old
partnership are adjusted to current market
values and the resulting capital balances for
Juwita and Kurniasari are Rp20,000,000 and
Rp24,000,000 respectively.
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12-3
Juwita and Kurniasari agree to admit
Dunia as a partner for Rp31,000,000.
In return, Dunia will receive a onethird equity in the partnership and
will share income and losses equally
with Juwita and Kurniasari.
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Equity of Juwita
Equity of Kurniasari
Dunia’s Contribution
Total equity after admitting Dunia
Dunia’s interest (1/3 x $75,000)
Dunia’s contribution
Dunia’s equity after admission
Bonus paid to Juwita and Kurniasari
12-3
Rp20,000,000
24,000,000
31,000,000
Rp75,000,000
Rp25,000,000
Rp31,000,000
25,000,000
Rp 6,000,000
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12-3
The entry to record the admission of Dunia to
the partnership is as follows:
Mar.
1 Cash
Arif Dunia, Capital
31 000 000
25 000 000
Maryanti Juwita, Capital
3 000 000
Heni Kurniasari, Capital
3 000 000
Rp6,000,000/2
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Adjusting for New Partner’s
Unique Qualities or Skills
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12-3
After adjusting the market values, the capital
balance of Juwita Cahyani is Rp80,000,000 and the
capital balance of Sri Darmawan is Rp40,000,000.
Elisa Chairunisa receives a one-fourth interest in
the partnership for a contribution of Rp30,000,000.
Before admitting Chairunisa, Cahyani and
Darmawan shared net income using a 2:1 ratio.
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12-3
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The bonus is computed as follows:
Equity of Cahyani
Rp 80,000,000
Equity of Darmawan
40,000,000
Chairunisa’s Contribution
30,000,000
Total equity after admitting Chairunisa
Rp150,000,000
Chairunisa’s equity interest after admission
x 25%
Chairunisa’s equity after admission
Rp 37,500,000
Chairunisa’s contribution
30,000,000
Bonus paid to Chairunisa
Rp 7,500,000
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12-3
The entry to record the bonus and admission of
Chairunisa to the partnership is as follows:
June
1 Cash
30 000 000
Juwita Cahyani, Capital
5 000 000
Sri Darmawan, Capital
2 500 000
Elisa Chairunisa, Capital
37 500 000
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12-3
The entry to record the bonus and admission of
Chou to the partnership is as follows:
June
1 Cash
2/3
Juwita Cahyani, xRp7,500,00
Capital
Sri Darmawan, Capital0
Elisa Chairunisa, Capital
30 000 000
5 000 000
2 500 000
37 500 000
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12-3
The entry to record the bonus and admission of
Chou to the partnership is as follows:
June
1 Cash
Juwita Cahyani, Capital
1/3 x
Sri Darmawan, Capital
Rp7,500,000
Elisa Chairunisa, Capital
30 000 000
5 000 000
2 500 000
37 500 000
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Withdrawal of a Partner
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12-3
On June 1, the partnership of X, Y, and Z
have capital balances of Rp50,000,000,
Rp80,000,000, and Rp30,000,000,
respectively. Z decides to retire from the
partnership and sells his interest to Y for
Rp35,000,000.
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12-3
The following entry is required to record Z selling
his interest to Y.
June
1 Z, Capital
Y, Capital
Transfer ownership
30 000 000
30 000 000
from Z to Y.
The amount paid to Y by Z has no impact on the
partnership’s accounting records.
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12-3
If Z had sold his interest
directly to the partnership, both
the assets and the owner’s
equity of the partnership would
have been reduced.
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12-3
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Example Exercise 12-4
Luki has a capital balance of Rp45,000,000 after
adjusting assets to fair market value. Cindy
contributes Rp26,000,000 to receive a 30% interest
in a new partnership with Luki.
Determine the amount and recipient of the partner
bonus.
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12-3
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Follow My Example 12-4
Equity of Luki
Rp45,000,000
Cindy contribution
26,000,000
Total equity after admitting Cindy Rp71,000,000
Cindy’s equity interest
x 30%
Cindy’s equity after admission
Rp21,300,000
Cindy’s contribution
Cindy’s equity after admission
Bonus paid to Luki
For Practice: PE 12-4A, PE 12-4B
Rp26,000,000
21,300,000
Rp 4,700,000
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Objective 4
12-4
Describe and illustrate
the accounting for
liquidating a
partnership.
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Liquidating Partnerships
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12-4
When a partnership goes out
of business, the winding-up
process is called the
liquidation of a partnership.
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Liquidation Process
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12-4
1. Sell the partnership assets. This step is called
realization.
2. Distribute any gains or losses from realization
to the partners based upon their incomesharing ratio.
3. Pay the claims of creditors using the cash from
step 1 realization.
4. After satisfying the creditors, distribute the
remaining cash to the partners based on the
balances in their capital accounts.
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12-4
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Liquidation Process
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12-4
Febriani, Gilang, and Hasanah share income and losses
in a ratio of 5:3:2. On April 9, after discontinuing
operations, the firm had the following trial balance.
Cash
Rp11,000,000
Noncash Assets
64,000,000
Liabilities
Rp 9,000,000
Juju Febriani, Capital
22,000,000
Bayu Gilang, Capital
22,000,000
Anggi Hasanah, Capital
22,000,000
Total
Rp75,000,000 Rp75,000,000
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Liquidation Process
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12-4
Between April 10 and April 30, 2006,
Febriani, Gilang, and Hasanah sell all
noncash assets for Rp72,000,000.
Thus, a gain of Rp8,000,000
(Rp72,000,000 – Rp64,000,000) is
realized.
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Gain on Realization
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12-4
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Balances before realization
Sale of assets and division of gain
Balances after realization
Payment of liabilities
Balances after payment of liabilities
Cash distributed to partners
Final balances
Cash +
Rp11 000 000
+72 000 000
Rp83 000 000
-9 000 000
Rp74 000 000
-74 000 000
Rp
0
Noncash
Assets =
Rp64 000 000
-64 000 000
Rp
0
0
Rp
0
0
Rp
0
Capital
Febriani
Gilang
Liabilities +
(50%) +
(30%)
Rp9 000 000 Rp22 000 000 Rp22 000
0
4 000 000
2 400
Rp9 000 000 Rp26 000 000 Rp24 400
-9 000 000
0
Rp
0 Rp26 000 000 Rp24 400
0 -26 000 000 -24 400
Rp
0 Rp
0 Rp
Gain Rp8,000,000
Hasanah
+
(20%)
000 Rp22 000 000
000
1 600 000
000 Rp23 600 000
0
0
000 Rp23 600 000
000 -23 600 000
0 Rp
0
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 1: Sale of assets
Cash
Noncash Assets
Gain on Realization
72 000 000
64 000 000
8 000 000
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 2: Division of gain
Gain on Realization
Juju Febriani, Capital
8 000 000
4 000 000
Bayu Gilang, Capital
2 400 000
Anggi Hasanah, Capital
1 600 000
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 3: Payment of liabilities
Liabilities
Cash
9 000 00
9 000 00
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 4: Distribution of cash to partners
Juju Febriani, Capital
26 000 000
Bayu Gilang, Capital
24 400 000
Anggi Hasanah, Capital
23 600 000
Cash
74 000 000
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Loss on Realization
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12-4
Febriani, Gilang, and Hasanah
sell all noncash assets for
Rp44,000,000. A loss of
Rp20,000,000 (Rp64,000,000 –
Rp44,000,000) is realized.
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 1: Sale of assets
Cash
44 000 000
Loss on Realization
20 000 000
Noncash Assets
64 000 000
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Loss on Realization
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12-4
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Balances before realization
Sale of assets and division of gain
Balances after realization
Payment of liabilities
Balances after payment of liabilities
Cash distributed to partners
Final balances
Cash +
Rp11 000 000
+44 000 000
Rp55 000 000
-9 000 000
Rp46 000 000
-46 000 000
Rp
0
Noncash
Assets =
Rp64 000 000
-64 000 000
Rp
0
0
Rp
0
0
Rp
0
Capital
Febriani
Gilang
Liabilities +
(50%) +
(30%)
Rp9 000 000 Rp22 000 000 Rp22 000
0 -10 000 000 -6 000
Rp9 000 000 Rp12 000 000 Rp16 000
-9 000 000
0
Rp
0 Rp12 000 000 Rp16 000
0 -12 000 000 -16 000
Rp
0 Rp
0 Rp
Rp20,000,000 Loss
Hasanah
+
(20%)
000 Rp22 000 000
000 -4 000 000
000 Rp18 000 000
0
0
000 Rp18 000 000
000 -18 000 000
0 Rp
0
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 2: Division of loss
Juju Febriani, Capital
10 000 000
Bayu Gilang, Capital
6 000 000
Anggi Hasanah, Capital
4 000 000
Loss on Realization
20 000 000
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 3: Payment of liabilities
Liabilities
Cash
9 000 000
9 000 000
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Entries to Record the Steps in the
Liquidation Process
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12-4
Step 4: Distribution of cash to partners:
Juju Febriani, Capital
12 000 000
Bayu Gilang, Capital
16 000 000
Anggi Hasanah, Capital
18 000 000
Cash
46 000 000
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12-4
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Example Exercise 12-5
Prior to liquidating their partnership, Toni and
Gendis had capital accounts of Rp50,000,000 and
Rp100,000,000, respectively. The partnership assets
were sold for Rp220,000,000. The partnership had
Rp20,000,000 of liabilities. Toni and Gendis share
income and losses equally. Determine the amount
received by Gendis as a final distribution from
liquidation of the partnership.
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12-4
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Follow My Example 12-5
Gendis’s equity prior to liquidation
Rp100,000,000
Realization of asset sale
Rp220,000,000
Book value of assets (Rp50,000,000 +
Rp100,000,000 + Rp20,000,000)
170,000,000
Gain on liquidation
Rp50,000,000
Gendis’s share of gain (50% x
Rp50,000,000)
25,000,000
Gentry’s cash distribution
Rp125,000,000
For Practice: PE 12-5A, PE 12-5B
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Loss on Realization—Capital
Deficiency
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12-4
Febriani, Gilang, and Hasanah sell all of the
noncash assets for Rp10,000,000. A loss of
Rp54,000,000 (Rp64,000,000 – Rp10,000,000)
is realized. The share of the loss allocated to
Febriani, Rp27,000,000 (50% of
Rp54,000,000), exceeds the Rp22,000,000
balance in her capital account. Febriani
contributes Rp5,000,000 to the partnership.
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Loss on Realization—
Capital Deficiency
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12-4
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Balances before realization
Sale of assets and division of gain
Balances after realization
Payment of liabilities
Balances after payment of liabilities
Receipt of Deficiency
Balances
Cash distributed to partners
Final balances
Cash +
Rp11 000 000
+10 000 000
Rp21 000 000
-9 000 000
Rp12 000 000
5 000 000
Rp17 000 000
-17 000 000
Rp
0
Noncash
Assets =
Rp64 000 000
-64 000 000
Rp
0
0
Rp
0
0
Rp
0
0
Rp
0
Capital
Febriani
Gilang
Liabilities +
(50%)
+
(30%)
Rp9 000 000 Rp22 000 000 Rp22 000
0 -27 000 000 -16 200
Rp9 000 000 Rp(5 000 000) Rp5 800
-9 000 000
0
Rp
0 Rp(5 000 000) Rp5 800
0
5 000 000
Rp
0 Rp
0 Rp5 800
0
0 -5 800
Rp
0 Rp
0 Rp
Febriani’s Contribution
Hasanah
+
(20%)
000 Rp22 000 000
000 -10 800 000
000 Rp11 200 000
0
0
000 Rp11 200 000
0
0
000 Rp11 200 000
000 -11 200 000
0 Rp
0
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12-4
Step 1: Sale of assets
Cash
10 000 000
Loss on Realization
54 000 000
Noncash Assets
64 000 000
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12-4
Step: Payment of liabilities
Juju Febriani, Capital
27 000 000
Bayu Gilang, Capital
16 200 000
Anggi Hasanah, Capital
10 800 000
Loss on Realization
54 000 000
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12-4
Step 3: Payment of liabilities
Liabilities
Cash
9 000 000
9 000 000
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12-4
Receipt of deficiency
Cash
Juju Febriani, Capital
5 000 000
5 000 000
Having the partner with a deficiency pay all or part of
the deficiency is not one of the four liquidation steps,
but it should make the other partners happy.
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Loss on Realization—
Capital Deficiency
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12-4
Febriani, Gilang and Hasanah
Statement of Partnership Liquidation
For Period April 10-30, 2008
Balances before realization
Sale of assets and division of gain
Balances after realization
Payment of liabilities
Balances after payment of liabilities
Receipt of Deficiency
Balances
Cash distributed to partners
Final balances
Cash +
Rp11 000 000
+10 000 000
Rp21 000 000
-9 000 000
Rp12 000 000
5 000 000
Rp17 000 000
-17 000 000
Rp
0
Noncash
Assets =
Rp64 000 000
-64 000 000
Rp
0
0
Rp
0
0
Rp
0
0
Rp
0
Capital
Febriani
Gilang
Liabilities +
(50%)
+
(30%)
Rp9 000 000 Rp22 000 000 Rp22 000
0 -27 000 000 -16 200
Rp9 000 000 Rp(5 000 000) Rp5 800
-9 000 000
0
Rp
0 Rp(5 000 000) Rp5 800
0
5 000 000
Rp
0 Rp
0 Rp5 800
0
0 -5 800
Rp
0 Rp
0 Rp
The remaining cash is distributed. Gilang receives
Rp5,800,000 and Hasanah receives Rp11,200,000.
Hasanah
+
(20%)
000 Rp22 000 000
000 -10 800 000
000 Rp11 200 000
0
0
000 Rp11 200 000
0
0
000 Rp11 200 000
000 -11 200 000
0 Rp
0
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12-4
Distribution of cash to partners:
Bayu Gilang, Capital
Anggi Hasanah, Capital
Cash
5 800 000
11 200 000
17 000 000
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12-4
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to
edit
Master
title
style
Example Exercise 12-6
Prior to liquidating their partnership, Sundari and
Baskoro had capital accounts of Rp20,000,000 and
Rp80,000,000, respectively. The partnership assets
were sold for Rp40,000,000. The partnership had
no liabilities. Sundari and Baskoro share income
and losses equally.
a. Determine the amount of Sundari’s deficiency
b. Determine the amount distributed to Baskoro
assuming Sundari is unable to satisfy the
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deficiency.
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12-4
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Follow My Example 12-6
a. Sundari’s equity prior to liquidation
Rp 20,000,000
Realization of asset sales Rp 40,000,000
Book value of assets
100,000,000
Loss on liquidation
Rp 60,000,000
Sundari’s share of loss (50% x
Rp60,000,000)
30,000,000
Sundari’s deficiency
Rp(10,000,000)
Rp80,000,000 – Rp30,000,000 share
of loss – Rp10,000,000. Sundari’s
deficiency also equals the amount
realized from asset sales.
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For Practice: PE 12-6A, PE 12-6B
b. Rp40,000,000
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12-5
Objective 5
Prepare the
statement of
partnership equity.
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Statement of Partnership Equity
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12-5
The change in the owners’
capital accounts for a period of
time is reported in a statement
of partnership equity.
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Statement of
Partnership Equity
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12-5
Investors Associates
Statement of Partnership Equity
For the Year Ended december 31, 2008
Balance, January 1, 2008
Capital additions
Net income for the year
Less partner withdrawals
Balance, December 31, 2008
Deny
Chandra
capital
Rp 245 000
50 000
40 000
(5 000
Rp 330 000
000
000
000
000)
000
Kiranti,
Capital
Rp 365 000
000
80 000
(45 000
Rp4 000 000
000
000
000
000)
000
Total
Partnership
Capital
Rp 610 000 000
50 000 000
120 000 000
(50 000 000)
Rp 730 000 000
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12-5
Financial Analysis and Interpretation
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KAP Shaleh & Banu had the following information
for the last two years:
2008
2007
Revenues
Rp220,000,000,000 Rp180,000,000,000
Number of employees
160
150
Revenue per
employee, 2008
Revenue per
employee, 2007
Rp220,000,000,000
= Rp137,500,000
=
160
Rp180,000,000,000
= Rp120,000,000
=
150
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Financial Analysis and Interpretation
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12-5
The revenues per employee
showed improvement in 2008.
Thus, each employee is producing
more revenues in 2008, than in
2007, which may indicate
improved productivity. Overall, it
appears the firm is properly
managing the growth in staff.
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