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Published by bunyawee6251, 2021-06-03 05:06:15

Accounting for Partnership

Accounting for Partnership

ACCOUNTING for Partnership

Mini English Program
A business entity can be formed in several formats such as a sole
proprietorship – a small business with one owner, easy to form but with limitations
i.e. small capital, business expansion is difficult, lack of competent personnel.
These may cease the operation of the entity. Formation as partnership shall solve
the aforesaid problems. A partnership is larger than a sole proprietorship, having 2
investors or more called partners. The operation of a partnership shall comply with
relevant laws such as the Civil and Commercial Code, the Revenue Code, the
Accounting Act B.E.2543, and Thai Accounting Standards, etc.

BUNYAWEE SUWANNABOOL NAME………………………………………………………………………..

BANGNA COMMERCIAL COLLEGE NICKNAME....................................................................
NO……………………………………….CLASS MEP
PHONE…………………………………………………………………….

Chapter 1

General Characteristics of Partnership

Outline

1. Definition of partnership
2. Essential characteristics of partnership
3. Kinds of partnerships
4. Partnership agreement
5. Registration of a partnership and formation of a limited partnership
6. Forms and attachments required for registration
7. Places for registration
8. Flow chart of steps of reserving juristic person’s name on internet

Learning Objectives

1. Able to tell the definition of partnership
2. Able to tell the essential characteristics of partnership
3. Able to name kinds of partnerships
4. Able to explain the partnership agreement
5. Able to explain the registration of partnership and formation of limited partnership
6. Able to name the forms and attachment required for registration
7. Able to name the places for registration
8. Able to explain steps of reserving juristic person’s name on internet
9. Able to explain steps and procedure of registering a partnership
10. Able to name the laws related to partnership
11. Having work habit of organized, careful, honesty, discipline, punctuality, and good attitude

towards the accounting profession

Accounting for Partnership Page 1

Pretest

Please mark X in front of the best answer
1. Which one is the definition of partnership?

a) Registered as ordinary partnership
b) Have not to be registered as partnership
c) The owners invest of assets or services
d) With an objective of profit sharing, to be dissolved after completion of the undertaking
e) Two persons or more jointly invest of assets
2. Which one is the essential characteristics of registered ordinary partnership?
a) There are 2 types of partner
b) There are 3 or more partners
c) Operated with a view to sharing profit
d) All partners be liable to the obligations of the partnership equal to the amount of investment
e) All are correct
3. Into how many kinds can partnerships be grouped?
a) 1 kind
b) 2 kinds
c) 3 kinds
d) 4 kinds
e) 5 kinds
4. Which one is correct?
a) A partnership must be registered
b) A partnership must not be registered
c) A partnership shall be registered or not
d) The laws do not rule out
e) c and d are correct
5. Which one is not described in the partnership agreement?
a) Penalties for breach of agreement
b) Location, objective and capital investment
c) Name of the partnership and names of the partners
d) Capital of all partners and profit and loss sharing
e) All are correct

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6. Which one is not the form required for registration?
a) Form hor sor 1
b) Form sor hor 1
c) Form sor sor chor 1
d) Form wor
e) None is correct

7. If the student form a limited partnership at Nontaburi province, where shall you request the
registration?
a) Office of business registration service, area 2
b) Office of business registration service, area 4
c) Office of business registration service, area 7
d) Section of central business registration
e) Town hall of the province

8. The last step of reserving juristic person’s name on internet is
a) Choose ‘Search and reserve juristic person’s name’
b) Choose ‘Register the reserving of juristic person’s name ’
c) The applicant receives the ‘username’ and ‘password’
d) Submit the information to the department of business development
e) The applicant print-out the result page of reserving the name to register

9. Step 2 of formation a limited partnership is
a) The partners enter into the agreement
b) Set the profit and loss sharing criteria
c) Search and reserve the limited partnership’s name
d) Prepare/fill the forms and attachments
e) None is correct

10. Which one is not the law related to partnership?
a) Orders
b) Accounting Act, B.E.2543
c) Notification of the Ministry of Commerce No. 83
d) Ministerial Regulations of the Ministry of Industry
e) All are correct

Accounting for Partnership Page 3

Chapter 1
General Characteristics of Partnership

Introduction

A business entity can be formed in several formats such as a sole proprietorship – a small
business with one owner, easy to form but with limitations i.e. small capital, business expansion is
difficult, lack of competent personnel. These may cease the operation of the entity. Formation as
partnership shall solve the aforesaid problems. A partnership is larger than a sole proprietorship,
having 2 investors or more called partners. The operation of a partnership shall comply with relevant
laws such as the Civil and Commercial Code, the Revenue Code, the Accounting Act B.E.2543, and
Thai Accounting Standards, etc.

TIP : A Limited Partnership must be registered as juristic person

Definition of Partnership

The Civil and Commercial Code, Section 1012 provides that: ‚A contract for the
organization of a partnership or a company is a contract whereby two or more persons agree to
unite for a common undertaking, with a view to sharing profits which may be derived therefrom‛

Assistant Professor Suriyu Muangkhunrong gave the definition of a partnership as an entity
having 2 persons or more jointly invest, with an objective of sharing the profit and loss according to the
agreed term, each investor in the partnership shall be called ‘partner’.

Special Professor Sophon Rattanakorn gave the definition of a partnership as ‘an ordinary
partnership is an agreement that entered into by 2 persons or more who jointly invest for common
undertaking with a view to sharing profit which may be derived from the undertaking. All partners
shall be unlimited liable to all obligations of the partnership’

From the above definitions we may summarize that a partnership means 2 persons or more
enter into an agreement to form and operate a business together, with an objective of sharing profit, and
the business must comply with relevant laws.

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Essential Characteristics of Partnership

The Civil and Commercial Code provides in many sections:
Section 1025 The ordinary partnership is that kind of partnership in which all the partners are
jointly and unlimitedly liable for all the obligations of the partnership.
Section 1026 Each partner must bring a contribution to the partnership. Such contribution
may consist of money, other properties or services.
Section 1027 In case of doubt, contributions are presumed to be of equal value.
Section 1028 If the contribution brought by any partner consists merely of his personal
services and the contract of partnership does not fix the value of such services, the share of such partner
in the profits is equivalent to the average of the shares of the partners whose contributions are in money
or other property
From above provisions, we can conclude that there are 4 essential characteristics of
partnership as follow:
1. There must be an agreement between 2 persons or more
2. There must be joint investment. All the partners shall contribute of any or some of the
followings:

- Cash
- Other assets
- Services, which mean knowledge and competency accepted by the partners and can be
valued in cash
3. The business must be jointly operated. The business must be in accordance with the
objectives set in the partnership agreement and must be legal
4. With a view to sharing the profit from the operation according to the defined terms.

Kinds of Partnerships

According to the Civil and Commercial Code:
Section 1013 There are three kinds of partnerships or companies; namely:
(1) ordinary partnerships;
(2) limited partnerships; and
(3) limited companies.

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Section 1015 A partnership or a company, upon registration being made in accordance with
the provisions of this Title, constitutes a juristic person distinct from the partners or shareholders of
whom it is composed.

Section 1016 The registration shall be made at the Registration Office of that part of the
Kingdom where the principal business office of the partnership or company is situated.

Any alteration subsequently made in the registered particulars and any alteration in any other
matters required or allowed to be registered by the provisions of this Title shall be registered at the
same Registration Office.

Section 1064 An ordinary partnership may be registered. The entry in the register shall
contain the following particulars:

(1) the firm name of the partnership;
(2) objects of the partnership;
(3) addresses of the principal business office and of all branch offices;
(4) names, addresses and occupations of every partner, provided that if any partner has a trade
name the entry in the register shall contain both his name and his trade name;
(5) names of the managing partners, in case only some of the partners have been appointed as
such;
(6) restrictions, if any, imposed upon the powers of the managing partners; and
(7) seals which are binding on the partnership.
The entry may contain any other particulars which the parties may deem expedient to make
known to the public.
The entry must be signed by every member of the partnership and must also be sealed with the
common seal of the partnership.
A certificate of registration shall be made and delivered by the Registrar to the partnership.
Section 1077 A limited partnership is that kind of partnership in which there are two types of
partners as follows:
(1) one or more partners whose liability is limited to such amount as they may undertake to
contribute to the partnership; and
(2) one or more partners who are jointly and unlimitedly liable for all the obligations of the
partnership.
Section 1078 A limited partnership must be registered. The entry in the register must contain

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the following particulars:
(1) the firm name of the partnership;
(2) a statement that the partnership is a limited partnership and the objects of such partnership;
(3) addresses of the principal business office and of all branch offices;
(4) names, trade names, addresses and occupations of the partners with limited liability, and the

amount of their contributions to the partnership;
(5) names, trade names, addresses and occupations of the partners with unlimited liability;
(6) names of managing partners;
(7) restrictions, if any, imposed upon the powers of managing partners to bind the partnership.
The entry may contain any other particulars which the parties may deem expedient to make

known to the public.
The entry must be signed by every member of the partnership and must also be sealed with the

common seal of the partnership.
A certificate of registration shall be made and delivered by the Registrar to the partnership.
Section 1079 Until registration, a limited partnership is deemed an ordinary partnership in

which all the partners are jointly and unlimitedly liable for all the obligations of the partnership.
Section 1080 The provisions concerning Ordinary Partnerships also apply to Limited

Partnerships insofar as they are not excluded or modified by the provisions of this Chapter 3.
If there are several partners with unlimited liability, the provisions applicable to an ordinary

partnership shall apply to the relationship as between themselves and the relationship between such
partners and the partnership.

Section 1083 The contributions of the partners with limited liability must be in money or other
property.

Section 1087 A limited partnership must be managed only by the partners with unlimited
liability.

Section 1088 If a partner with limited liability interferes with the management of the
partnership, such person becomes jointly and unlimited liable for all the obligations of the partnership.

The expression of opinions and advice or the casting of votes for the appointment or dismissal
of managers in cases provided by the contract of partnership is not considered as interference with the
management of the partnership.

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Summary There are 2 kinds of partnerships; namely:
1. Ordinary or Unlimited Partnership
2. Limited Partnership

1. Ordinary or Unlimited Partnerships

A kind of partnership which all partners to be jointly and unlimited liable to all the obligations
of the partnership. The ordinary partnership may be registered or not. All the partners entitled in the
management of the partnership. The ordinary partnership can be grouped into 2 kinds

1.1. Registered Ordinary Partnership, is a juristic person which all partners shall be jointly
and unlimitedly liable for all the obligations of the partnership. There may be one or more managing
partners.

From the above details we may summarize the essential characteristics of a registered ordinary
partnership as follow

1. Having 2 persons or more as partners
2. All partners shall be jointly and unlimitedly liable to all the obligations of the

partnership
3. Each partner shall contribute of cash, assets or services
4. Having an objective to jointly operate a business
5. Operate the business with a view to sharing profits derived
6. Must be registered and have the status of juristic person
1.2. Unregistered Ordinary Partnership, has a status of ordinary person. If the partners did
not define in the partnership agreement, the laws rule that all the partners shall be entitled in the
management of the partnership.
2. Limited Partnership
A partnership that must be registered as a juristic person under the laws, separate from the
partners. The name shall always contain the word ‘limited partnership’. There are 2 types of partners
in a limited partnership:
2.1. Limited Liability Partners. Partners whose liability is limited to the amount they had
committed to contribute to the partnership. This type of partner shall not be entitled to the management
of the partnership. Their contributions must be of cash or other assets but not services.

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2.2. Unlimited Liability Partners. Partners whose liability to all the obligations of the
partnership is jointly and unlimitedly. In case the assets of the partnership is not enough for the
liabilities, the creditors may unlimitedly sue from the private property of each partner. Partners of this
type can be entitled as the managing partners of the partnership and may contribute of cash, other assets
or services.

From the above details, we may summarize the essential characteristics of a limited partnership
as follow:

1. Having 2 persons or more as partners
2. There are 2 types of partners: limited liability partners and unlimited liability partners
3. Every partner shall contribute to the partnership of cash, other assets or services, with

the exception of the limited liability partners that cannot contribute of services
4. Having an objective to jointly operate a business
5. Operate the business with a view to sharing profits derived
6. Must be registered and have the status of juristic person. Until registration, a limited

partnership is deemed an ordinary partnership in which all the partners are jointly and
unlimitedly liable for all the obligations of the partnership.

Differences between an ordinary partnership and a limited partnership

Ordinary Partnership Limited Partnership
1. May be registered or not 1. Must be registered as juristic person

- In case registered, will be a juristic 2. There are 2 types of partners
person - Limited Liability Partner
- Unlimited Liability Partner
- In case un-registered, will be an -
ordinary person
3. A limited liability partner shall contribute of
2. Has only one type of partner : unlimited cash and other assets. Contribution of
liability partner services is not accepted.

3. A partner can contribute of cash, other assets
or services

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Ordinary Partnership Limited Partnership

4. All partners are entitled for the management of 4. A limited liability partner cannot be a

the partnership, if not explicitly agreed that managing partner. Only unlimited liability

some specific partners shall be managing partners can be managing partners

partners

5. Creditors are entitled to claim for the 5. Creditors cannot claim for the obligations from

obligations from private property of every private property of a partner.

partner

6. When a partner dies, be bankrupted or 6. When an unlimited liability partner dies, be

incompetent, the partnership shall be bankrupted or incompetent, the partnership

dissolved, unless otherwise agreed as other need not to be dissolved

7. If registered, shall pay corporate income tax, 7. To pay corporate income tax

otherwise to pay personal income tax

8. No partner may carry on any business of the 8. A limited liability partner can carry on any

same nature as and competing with that of the business for his own or others’ benefits, even

partnership – either for his own or others’ of the same nature as that of the partnership.

benefits - without the consent of the other

partner.

Partnership Agreement

The laws do not require that there must be a written agreement in formation of a partnership.
Therefore, when 2 persons or more express their intent to join as partners means an agreement is made.
But it should be made in writing for an evidence, and every partner should sign on the agreement to
avoid any trouble onward. The partnership agreement should contain:

1. Name and location of the partnership
2. Names and addresses of the partners
3. Objectives of the partnership
4. Capital of each partner
5. Power and authority of partners in managing the partnership
6. Operation, accounting policy, accounting period and period ending date

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7. Profit and loss sharing ratios and remuneration to the partners, such as interest on capital,
salary, goodwill, or bonus provisions to the partners, and other terms, etc.

8. Increase and reduction of capital, and draws
9. Life insurance for partners
10. Admission of a new partner, resignation of a partner, death of a partner, and dissolution
11. Withdrawal of a partner, and criteria of capital repayment to the withdrawing partner

Registration of a Partnership and Formation of a Limited Partnership

The particulars required by laws to be registered for juristic partnerships, i.e. registered
ordinary partnership and limited partnership are the same (section 1064 and section 1077) as follow:

1. Name of the partnership
2. Objects of the partnership (in case of limited partnership, a statement that the partnership is a
limited partnership is also required)
3. Addresses of the head office and of all branch offices
4. Names, trade names, addresses, occupations of all the partners and the amount of their
contributions to the partnership (in case of limited partnership, the limited liability partners and the
unlimited liability partners shall be described separately)
5. Names of managing partners
6. Restrictions upon the powers of managing partners (if any)
7. Any other details which may be expedient to make known to the public (if any)

Formation of a Limited Partnership

Procedure of forming a limited partnership may be arranged in 4 steps as follow:

Step 1. Settle agreement among partners of all essential elements

Many persons interfere the operation of limited partnership. To prevent any conflict during the
operation, all the partners shall make an agreement regarding the following elements:

1. Amount of investment to be contributed by each partner. (The partners may contribute of
cash, assets or services, with the exception of limited liability partner which cannot contribute of
services. Contribution of assets or services must be valuated in cash) And the payment period of such
contributions (the payment should be completed before the registration of partnership)

2. Scope or framework of the undertakings of the partnership, or the ‘objects’ should be

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defined. At present, several objects shall be preferred for the mobility to add or change the business.
No waste of time in registering more objects or registering the change of object. However, too many
objects registered may have some disadvantages. This may give opportunity to the management to
engage in any non-dominant business or give them too extensive power.

3. Appointment of the managing partners (managing partners are those who can perform on
behalf of the partnership. The managing partners shall only be appointed from the unlimited liability
partners)

4. The profit and loss sharing
5. Other issues such as criteria and procedure to modify the existing partnership agreement,
address of the head office, restrictions on the powers of the managing partners, and appointment of an
auditor, etc.

Step 2. Checking and reserving the limited partnership’s name

Currently, there are many business entities that formed as registered partnership, limited company
and public company limited. To avoid confusion of similar or duplicate names, the Department of
Business Development requires that all applicants for registering a new limited partnership check and
reserve the juristic person’s name before the registration.

Step 3. Complete the forms and attachments

When the required name is checked and confirmed by the officers that it is not similar or duplicate
to any other juristic person already registered. The applicant is deemed to have the complete, accurate
and real name for the request form.

Step 4. Request for registration

The request can be submitted via 2 channels
1. Submit the request forms and the attachments to the Registrar. The managing partners can

submit by themselves or empower others to act on their behalf
The applicant should get the forms from the Department of Business Development or any of its

offices, either in Bangkok Metropolitan or provincial offices, or from the website. Input all fields
completely and correctly in printing, have the signatures of all relevant persons. Then submit the
completed forms for registration.

2. Apply for registration on internet at www.dbd.go.th, and allow the verification of the
Registrar. Once the application is verified, the applicant should print-out the completed request form.

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Have all the partners sign on the print-out with the partnership seal. Then submit the forms for
registration. Submission via this channel is much faster than the 1 channel, since the Registrar will
only verify that the submitted request forms are identical to those applied on the internet.

The applicant inputs all information into the forms on the internet. The Registrar shall check the
internet application, if they are correct, he will inform to the applicant via the E-mail. The applicant
download the completed and checked forms from the website, print out and have the signatures of all
relevant persons, then submit the forms for registration.

Forms and Attachments required for Registration

The Department of Business Development, Ministry of Commerce requires the forms and
attachments for registration as follow:

1. Form for requesting the partnership’s registration
2. Form for registration
3. Objects
4. Form sor sor chor 1
5. Form for reserving juristic person’s name
6. Evidence of investment payment

 A confirmation letter from a commercial bank, or

 Capital payment certificate
7. Copy of identification cards of managing partners who sign the request form
8. Copy of the notary public appointment (if any)
9. Copy of the letter of power of attorney (if any)
10. In case an alien invest in the partnership from 40% to 50% of the registered capital, or an
alien invest in the partnership for less than 40% of the registered capital but such alien is authorized to
perform on behalf of the partnership. All Thai partners have to attach the evidence of the source of
their investment, showing the correct amount of each partner’s investment as follow:

 Copy of book bank or copy of bank statement for the past 6 months, or

 Confirmation letter from a commercial bank to certify the financial position of the
partner, or

 Copy of any evidence of the source of investment
The request form must be submitted to the Office of the Company and Partnership

Accounting for Partnership Page 13

Registration, the Office of Business Registration, Department of Business Development, or the Office
of Business Registration Service area 1-7, or the Provincial Business Development Offices where the
head office of the partnership located.

List of the forms required for the registration are:

1. Form for requesting the partnership’s registration
A form for requesting the partnership’s registration. One sheet with two pages. The first page
contains details required for the registration. The second page is the certificate of registration to be
issued to the applicant
2. Form for registration
A form of particulars to be registered for the formation of the partnership. The particulars
required by laws to be registered as mentioned above. All particulars must be as described in the
partnership agreement. The form comprises 3 sheets ( each of 1 page).
3. Objects
A form describing all objects of the partnership and company limited. For a partnership the
word ‘company’ to be deleted and a word of juristic status whether ‘registered ordinary partnership’ or
‘limited partnership’ to be added. Underneath the partnership name is the registration number. For
registering the partnership, the officer shall fill in the issued registration number.
4. A form of particulars related to the business of the partnership or company limited, to
be used instead of the business registration for a juristic person.
(2 copies for Bangkok metropolitan area, 3 copies for provincial areas)
5. Letter of power of attorney
It is the responsibility of the managing partners to carry out the partnership registration to
completion. However, they may authorize others to perform on their behalf, which require a letter of
power of attorney in a defined format.
6. Form for reserving juristic person’s name
In registering the formation of partnership or registering the modification (the name) of
partnership, previously the applicant will be informed of the result of the juristic person’s name
checking after the officers complete the verification of the registration request. Currently, the new
rules provide that the applicant may check and reserve the juristic person’s name before the registration
request using the form of checking and reserving juristic person’s name.

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6. Letter of Power of Attorney
Letter of Power of Attorney
Written at……………………………

Date ……………………………………

I, the partnership / promoters / company ……………………………………., hereby
authorize …………………………………………………., whose …………… card
number ……………………………, issued by ………………………………, on the date
of ……………………………, residing at ........................................................................................, whose
telephone number is ………………….. to request for registering …………………………………..
of ……………………………………….. partnership / company to the registrar of …………….. office of the
company and partnership registration on behalf of the authorized person to act on behalf of the entity named
above; to modify any statement or information in the request form; and to acknowledge the order in every respect
of the registrar on behalf of the entity named above.

(*)…………………………………………………………………………………………………
I shall be entirely held responsible for what may happen from this power of attorney

[Seal] Signature……………………………………….. Grantor
(………………………………………………..)

Signature……………………………………….. Grantor
(………………………………………………..)

Signature……………………………………….. Grantee
(………………………………………………..)

Signature……………………………………….. Grantee
(………………………………………………..)

Signature……………………………………….. Witness
(………………………………………………..)

Signature……………………………………….. Witness
(………………………………………………..)

Note : In case the authorization giving to the grantee is more than what described in this power
of attorney, they shall be clearly described in the blank space (*)………………………………

Accounting for Partnership Page 32

Places for Requesting the Registration
Places for requesting the registration in Bangkok Metropolitan are:

1. Office of Business Registration Service, Area 1 (Pinklao), Thanalongkorn Tower, 14th floor,
Borommaratchachonnani Road, Bang Bamru, Bang Phlat, Bangkok 10700. Tel. 02-446-8060-
68, facsimile 02-446-8169, 02-446-8191

2. Office of Business Registration Service, Area 2 (Phahonyothin), 78/13 Rama 6 Road
(Pradipat Intersection), Phayathai, Bangkok 10400. Tel 02-618-3340-41, 45, facsimile 02-
618-3343-4

3. Office of Business Registration Service, Area 3 (Rajadapisek), Preecha Complex Building C2
3rd floor, Rajadapisek Road, Huai Khwang, Bangkok 10310 (opposite Sutthisan Police
Station). Tel. 02-276-7259-64, facsimile 02-276-7263

4. Office of Business Registration Service, Area 4 (Surawong), Worawit Bldg 8th floor zone A-
B, 222 Surawong Road, Si Phraya, Bang Rak, Bangkok 10500. Tel 02-234-2951-3, facsimile
02-266-5852-3

5. Office of Business Registration Service, Area 5 (Ramkhamhaeng), Preecha Complex (C 2) 4th
floor, Rajadapisek Road, Huai Khwang, Bangkok 10310 (opposite Sutthisan Police Station).
Tel. 02-276-7255-7, facsimile 02-276-7258, 68

6. Office of Business Registration Service, Area 6 (Sri Nakarin), Modernform Building 16th
floor, Sri Nakarin Road, Suan Luang, Bangkok 10250. Tel. 02-722-8366-7, facsimile 02-722-
8369

7. Office of Business Registration Service, Area 7 (Chaengwattana), Preecha Complex (C 2) 5th
floor, Rajadapisek Road, Huai Khwang, Bangkok 10310 (opposite Sutthisan Police Station).
Tel. 02-276-7250-1, facsimile 02-276-7252

8. Section of Central Business Registration, Department of Business Development Building, 9th
floor, Nontaburi 1 Road, Amphor Muang, Nontaburi 11000. Tel. 02-547-5050, facsimile 02-
547-4448-9

Accounting for Partnership Page 33

Flow Chart of Steps of Reserving Juristic Person’s Name via Internet
Flow Chart of Steps of Reserving Juristic Person’s Name on Internet

Applicant subscribes at the website

Applicant receives the ‘username’
and ‘password’

Choose ‘Search and reserve juristic
person’s name’ and Login using

received ‘username’ and ‘password’

Choose ‘register the reserving of
juristic person’s name’ and fill in the

reserving form, click ‘ok’

The officers check and inform the
result via E-mail

The applicant print-out the result
page to register at any office
throughout the Kingdom

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Laws on Partnership

Laws in relevant to partnership from the formation , undertaking, to dissolution are:
1. Revenue Code
2. Civil and Commercial Code
3. Acts, such as

3.1. Business Registration Act, B.E. 2499
3.2. Act Prescribing Offences Related to Registered Partnerships, Limited Partnerships, Limited

Companies, Associations and Foundation, B.E. 2499
3.3. Act Prescribing Offences Related to Registered Partnerships, Limited Partnerships, Limited

Companies, Associations and Foundation (Issue 2), B.E. 2535
3.4. Accounting Act, B.E. 2543
3.5. Small and Medium Enterprises Promotion Act, B.E. 2543
4. Ministerial Regulations, such as
4.1. Ministerial Regulation of the Ministry of Commerce: The Financial Statements to be Excluded

from Certified Public Accountant’s Audit and Comment, B.E. 2544.
4.2. Ministerial Regulation of the Ministry of Industry: Numbers of Employee and Value of Asset

for the Small and Medium Enterprises, B.E. 2545.
5. Notifications, such as

5.1. Notification of the Ministry of Commerce, No. 83 (B.E. 2515): Prescribing Businesses Not
Falling under the Application of the Law on Business Registration

5.2. Notification of the Commercial Registration Department: Prescribing Category of Account to
be kept, Statements and Particulars Entered in the Accounts, Duration for which the
Particulars must be Entered in the Accounts, and Relevant Documents Used in the Entry of
accounts, B.E. 2544

5.3. Notification of the Department of Business Development: The Brief Particulars in the
Financial Statements, B.E. 2544 (Named as ‘Compendium of Financial Statement’ in Chapter
2 onward)

6. Orders, such as
6.1. Order of the Revenue Department No. tor por 1/2528: Use of Accrual Basis Accounting in
Calculating Incomes and Expenses of Company or Registered Partnership

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6.2. Order of the Office of the Central Company and Partnership Registration No. 3/2543:
Appointment and Responsibilities of the Registrar for the Provincial Company and
Partnership Registration Office

Summary

Partnership means 2 persons or more agree to unite for a common undertaking, with a view to
sharing profits which may be derived there form, and such undertaking shall be legal.

There are 2 kinds of partnerships : ordinary or unlimited partnership and limited partnership
1. Ordinary or Unlimited Partnerships is the kind of partnership in which all the partners
are jointly and unlimitedly liable for all the obligations of the partnership. There are 2
kinds of ordinary partnerships: registered ordinary partnership and un-registered
ordinary partnership
2. Limited Partnership is the kind of partnership which must be registered as a juristic
person, separate from the partners

The laws do not require a written agreement in the formation of partnership. However, to
avoid any trouble onward, a written agreement is recommended. For requesting the registration, forms
and attachments for partnership registration must be completed and submitted at the places for
registration as specified by the Department of Business Development.

e-Learning Sources Why an entity require a
www.dbd.go.th capital increase?
www.fap.or.th

Learning Activities
Search for an example of partnership registration form for all kinds of
partnerships, study in detail and discuss on the searched information in class

Accounting for Partnership Page 36

Chapter 2
Accounting for Partnerships

Outline

1. Transactions relating to Partners' Equity
2. Capital Interest and Profit Sharing
3. Advance to Partners and Loans from Partners
4. Opening Entries
5. Change from Sole Proprietorship to Partnership

Learning Objectives

1. Able to explain the transactions relating to partners’ equity
2. Able to explain capital interest and profit sharing
3. Able to explain advance money and loans from partners
4. Able to record the opening entries
5. Able to record change from sole proprietorship to partnership
6. Having work habit of organized, careful, honesty, discipline, punctuality, and good attitude

towards the accounting profession

Accounting for Partnership Page 30

Chapter 2
Accounting of Partnership

Introduction

Journal entries of assets, liabilities, revenues and expenses of a partnership are the same as of a
sole proprietorship, using the double- entry bookkeeping system. But the entries of capital, and
structure of the balance sheet will be different from those of a sole proprietorship. Since a partnership
is operated under the Civil Code, also the preparation of financial statements must be in accordance
with the Notification of the Department of Business Development, Title “Compendium required in the
Financial Statements (2554 B.E.).

Transactions relating to Partners’ Equity

The concept of recording assets, liabilities, revenues and expenses of a partnership is not
different from those of a sole proprietorship. But the transactions relating to capital will be recorded
and reported in the balance sheet in a different format depending on the business types.
A partnership has at least 2 persons contribute in the partnership. The capital of a partnership is called
“Partners’ Equity”. The transactions relating to capital or partners’ equity are as follow:

1. Investment. Partners’ investment of cash, or assets other than cash which may be at the

formation of the partnership, or as additional investment to expand the business. Additional investment
will increase the interest of the partner in the partnership.

In case that the partner contributes of asset, it should be recorded at the “fair market value”.

2. Capital Reduction or Withdrawal. The partners withdraw their capitals from the

partnership to lower their investment, may be cash withdrawals or other assets.

3. Drawings for Personal Use. The partners draw cash or other assets for personal use

during the accounting period. These will be treated as profit allocation in advance before closing
process.

4. Appropriation of Profit and Loss. When a partnership comes to the end of an

accounting period, the operation will report the net profit or loss of the partnership. The net profit or
loss will be allocated among all partners by the profit and loss sharing ratios. In case the partnership

Accounting for Partnership Page 31

does not set the profit and loss sharing ratios, according to thai law - the profit and loss will be
appropriated by the capital ratio. The profit may be appropriated to the partners in partial, the
remaining may be kept for the operation of the partnership.

TIP When a partner contributes of assets, the value will be the fair market value

Capital Interest and Profit Sharing

Capital Interest of Partner is the ownership of each partner in the total equity or net assets of
the partnership. Interest of each partner equals to his net contribution at the formation of the
partnership, and may change after profit and loss sharing, additional investment or withdrawals.

Profit Sharing of Partner is the appropriation of the net profit from operation to all partners
by the ratios as settled in the partnership agreement.

Advance to Partners and Loans from Partners

Sometime the partnership may pay advance money to a partner for operations, or the partner
may draw money for personal use. On the other hand, when the partnership lacks of liquidity or
requires more money for the operation, the partnership may ask for loan from a wealthy partner. The
entries of such transactions must be in separate account from the assets or liabilities to the external
party as follow:

1. Advance and Loans to Partners

Advance and Loans to Partners will be recorded in the “Advance to Partners” account or
“Loans to Partners” account. They will be treated as receivable accounts, and will be reported under
the current assets in the balance sheet. If any interest on such loan is applicable, it will be other income
of the partnership.

2. Loans from Partners

Sometime the partnership may borrow from the partner. The loan will be recorded in the
“Loans from Partners” account. If any interest is applicable, according to the partnership agreement,
the interest payment will be expense of the partnership. The Loans from Partners account is a payable
account, and to be reported under the current liabilities if the payment term is within 1 year.

Opening Entries

When 2 persons agree to join as partners, they will contribute cash, or assets such as office
equipment, land, building, inventory or other assets as investments. The opening entries at the
formation of the partnership intends to report the investment of each partner in detail. In case the

Accounting for Partnership Page 32

amount of capital is not clearly disclosed, the law rules that investments of all partners are equal.

Opening entries of the partnership may be in different cases as follow

Case 1 Partner contributes of cash only

Case 2 Partner contributes of cash and other assets

Case 3 Partner contributes of labor

Case 4 Partner contributes of net balance

Case 1 Partner contributes of cash only. The entries will be

Dr. Cash XX

Cr. Capital – Partner’s name XX

Case 2 Partner contributes of cash and other assets. The entries will be

Dr. Cash XX

Assets (each contributed item at the fair market value) XX

Cr. Capital – Partner’s name XX

Note : Value of other assets will be at the fair market value

Case 3 Partner contributes of labor
The contribution of labor may be knowledge, capability, intelligence, which is the goodwill of

that partner. The contribution of labor must be clearly stated in the partnership agreement whether they
will be recorded in the book of account of the partnership or not and at what value, which depends on
the following agreement:

1. In case eligible for capital repayment it will be recorded in the book of accounts as
goodwill. If the agreement did not state the labor value, the law rules that
Labor value = average of partners contribution of cash and other assets
The entries will be

Dr. Goodwill XX

Cr. Capital - Partner (who contributes of labor) XX

2. In case not eligible for capital repayment, it will not be recorded in the book of account.
This have to be stated in the partnership agreement.

Accounting for Partnership Page 33

Case 4 Partner contributes of net balance.

The entries will be

Dr. Cash XX

Assets (each item at market value) XX

Cr. Account Payable (each separate payable) XX

Capital – Partner’s name XX

The followings are examples of the opening entries for all 4 cases above

Example 1 On January 1, 25x4 Sam and Maam joined as partners, contributed THB 250,000 and

THB 300,000 of cash respectively

Calculation of the Capital Ratio

Capital Ratio Sam : Maam = 250,000 : 300,000

= 5:6

The opening entries will be

General Journal Page…..…..

25x4 Transactions A/C Debit Credit
MD No.

Jan 1 Cash 550,000 -
Capital’s Sam
Capital’s Maam 250,000 -
300,000 -
Sam and Maam contributed of cash

Example 2 Jam and Um agreed to form a partnership on February 20, 2014. Both of them contributed

of cash and other assets as follow

Jam Um

Cash 100,000 150,000

Inventory 40,000 -

Fixtures 35,000 48,000

Accounting for Partnership Page 34

The entries will be

General Journal Page…..…..

25x4 Transactions A/C Debit Credit
MD No.
100,000 - 175,000 -
Jan 1 Cash 40,000 -
Inventory 35,000 - 198,000 -
Fixtures
Capital’s Jam 150,000 - Page…..…..
Jam contributed of cash and assets 48,000 -
Cash Credit
Fixtures
Capital’s Um 175,000 -
Um contributed of cash and assets 198,000 -

Note : The above transactions may be recorded as compound entries as follow
General Journal

25x4 Transactions A/C
MD No. Debit

Jan 1 Cash 250,000 -
Inventory 40,000 -
Fixtures 83,000 -
Capital’s Jam
Capital’s Um
Jam and Um contributed of cash and assets

Example 3 On March 1, 25x4 Mr. Suriya, Mrs. Suda, and Mr. Sakda agreed to join as partners. They
contributed of cash, other assets and labor to form the partnership as follow

Cash Mr.Suriya Mrs.Suda Mr.Sakda
Office Equipment 120,000 180,000 150,000
labor - 30,000 29,000
Delivery Van 50,000 - -
Building - 300,000 -
- - 500,000

Accounting for Partnership Page 35

The entries will be

General Journal Page…..…..

25x4 Transactions A/C Debit Credit
MD No. 170,000 -
Jan 1 Cash 120,000 -
Goodwill 50,000 -

Capital’s Suriya 180,000 -
Suriya contributed of cash and labor 30,000 -
Cash 300,000 -
Office Equipment
Delivery Van 510,000 -

Capital’s Sakda
Mrs.Suda contributed of cash and assets

Cash 150,000 -
Office Equipment 29,000 -
Building 500,000 -

Capital’s Mr.Sakda 679,000 -
Mr.Sakda contributed of cash and assets

Example 4
On June 1, 2014 Kai, Cook, and Gluay joined to form a partnership. Kai contributed THB 40,000 of
cash. Cook contributed THB 38,000 of fixtures. Gluay contributed of labor which not yet set the
value. The partners agreed that Kluay is eligible for capital repayment

Calculation of Capital - Gluay will be

Capital – Gluay = (40,000 + 38,000) / 2
39,000
=

Accounting for Partnership Page 36

The opening entries will be

General Journal Page…..…..

25x4 Transactions A/C Debit Credit
MD No.
40,000 40,000
Jun 1 Cash 38,000 38,000
Fixtures 39,000 39,000
Goodwill
Capital – Kai
Capital – Cook
Capital – Gluay
Partners contributed of cash, assets and
labor

Example 5
On April 1, 2014 Je Shop, Jan Shop, and Jon Shop agreed to form a partnership. On the formation date
Je, Jan and Jon contributed of net balances of their sole proprietorships as follow

Cash Je Jan Jon
Account Receivable 100,000 480,000 300,000
Office Supplies 15,000 -
Office Equipment - 9,000
Building - 40,000 55,000
Account Payable - -
Accrued Rental 400,000 - -
65,000 - 4,000
Calculation of Capital Ratio - 25,000
Capital Ratio Je : Jan : Jon -

Opening entries will be = 450,000 : 495,000 : 360,000
= 10 : 11 : 8

Accounting for Partnership Page 37

General Journal Page…..…..

25x4 Transactions A/C Debit Credit
MD
No. 100,000 - 65,000 -
Jun 1 Cash 15,000 - 450,000 -
Account Receivable 101 400,000 -
Building 103
Account Payable 107
Capital – Je 201
Je contributed of net balances 301

Cash 101 480,000 -
Office Supplies 104 40,000 -
201
Account Payable 302 25,000 -
Capital – Jan 495,000 -
Jan contributed of net balances

Cash 101 300,000
Office Supplies 104 9,000
Office Equipment 106 55,000
202
Accrued Rental 303 4,000
Capital – Jon 360,000
Jon contributed of net balances

Change from a Sole Proprietorship to a Partnership

In case a sole proprietorship has been operated for a while and would like to expand or change
to a partnership. He may join his sole proprietorship with other sole proprietorship or person. He can
contribute cash, assets and liabilities of his sole proprietorship as investment, the old sole
proprietorship is presumed to be dissolved. Other partner may contribute cash, assets, and/or liabilities
of his sole proprietorship as investment for the new partnership formation.

Journal entries of the new partnership may continue using the old book of accounts of the

Accounting for Partnership Page 38

business. Or the new partnership may open a new book of accounts of their own, which result in
different opening entries. Transactions will be recorded as usual. There are 2 methods to record the
opening entries of a partnership

Method 1 Using old book of accounts of the sole proprietorship
Method 2 Using a new book of accounts

Example 6
Tom and Nok agreed to form the Song Gler Partnership on January 1, 2014. Tom owned a retail shop
and contributed the assets and liabilities of the shop as follow

Tom Shop

Balance Sheet

As of January 1, 2014

Assets Liabilities and Equities

Current Assets Current Liabilities

Cash 80,000 Account Payable 110,000

Account Receivable 100,000 Accrued Expenses 44,000 154,000

Inventory 250,000 430,000 Owner’ Equity

Non Current Assets Capital - Tom 376,000

Fixtures 150,000

Less Acc.Depreciation 50,000 100,000

Total Assets 530,000 Liabilities and Owner’ Equity 530,000

The two partners agreed that Nok would contribute cash at the same amount as the net value of Tom
after revaluation some of the assets and liabilities as follow

1. Collectible account payable would be thb 95,000
2. Value of inventory increased by thb 10,000
3. Net book value of fixtures would be thb 120,000 equal to the fair market value
4. Credit thb 15,000 as goodwill of Tom from renowned operations
5. Accrued expenses would be thb 3,000

Accounting for Partnership Page 39

Method 1 Using the old book of accounts of the sole proprietorship

Using this method, we have to adjust the journal entries in the old book of accounts before the capital –

partner entries
The entries will be

General Journal Page 1

25x4 Transactions A/C Debit Credit
MD No.

Jan 1 Inventory 104 10,000 -

Accumulate Depreciation- Fixture 106 20,000 -
Goodwill 107 15,000 -
108
Allowance for Doubtful Account 5,000 -

Accrued Expenses 202 3,000 -

Capital – Tom 301 37,000 -

Adjust assets and liabilities

Cash 101 413,000 -
Capital – Nok (376,000+37,000) 302
413,000 -
Nok contributed of cash equal to net value
of Tom after revaluation

Accounting for Partnership Page 40

Method 2 Opening new book of accounts
The procedures are recording all adjustments, closing all accounts relating to assets and liabilities in the
old book of accounts of the sole proprietorship, then record the opening entries in the new book of
accounts.
Journal entries in the old book of accounts of the sole proprietorship will be

General Journal Page…..…..

25x4 Transactions A/C Debit Credit
MD
No. 10,000 5,000
Jan 1 Inventory 20,000 3,000
Fixtures - Acc. Depreciation 104 15,000 37,000
Goodwill 106
Allowance for Doubtful Account 107
Accrued Expenses 108
Capital – Tom 202
Adjust assets and liabilities 301

Account Payable 201 110,000 -
Accrued Expenses 202 47,000 -
Allowance for Doubtful Account 108 5,000 -
Fixtures – Acc. Depreciation 106 30,000 -
Capital - Tom 301 413,000 -
101
Cash 103 80,000 -
Account Receivable 104 100,000 -
Inventory 105 260,000 -
Fixtures 107 150,000 -
Goodwill 15,000 -
Account Closing, the sole proprietorship

Accounting for Partnership Page 41

The entries in the new book of accounts of the partnership will be

25x4 General Journal A/C Debit Page 1
MD No. Credit
Jan 1 Transactions 80,000 -
100,000 - 110,000 -
Cash 260,000 - 47,000 -
Account Payable 150,000 - 5,000 -
Inventory 15,000 - 30,000 -
Fixtures 413,000 -
Goodwill

Account Payable
Accrued Expenses
Allowance for Doubtful Account
Fixtures – Acc. Depreciation
Capital - Tom
Tom contributed of assets and liabilities

Cash 413,000 -
Capital - Nok
413,000 -
Nok contributed of cash equal to net value
of Tom after adjustments

Summary

Transactions relating to partners’ equity will show the capital accounts of all partners reporting the
investment, capital increase, capital decrease (withdrawals), personal drawings, and appropriation of
profit and loss. These will show the capital interest and profit sharing. Advance and loans to partners,
loans from partners. Opening entries of the partnership and the investment which the partners may
contribute of cash or other assets at the fair market value. Including the change from a sole
proprietorship to a partnership.

Accounting for Partnership Page 42


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