Accounting for Partnership

Noi Nhong and Ning Partnership

Statement of Partnership Liquidation

As on June 30, 2014

Assets Partners’ Equity

Description Cash Other Liabilities Loan – Noi Noi Nhong Ning
Assets
Profit and Loss Sharing Ratio 2/5 1/5 2/5
Balance before liquidation 40,000 292,000 127,000 15,000 40,000 60,000 90,000
Sale of assets, and loss
allocation from sale at 2:1:2 84,000 (292,000) - (83,200) (41,600) (83,200)
124,000 127,000 (43,200) 18,400 6,800
Paid third party liabilities (124,000) (124,000) 15,000
15,000 (43,200) 18,400 6,800
All partners paid off liabilities - 3,000
on behalf of the partnership *
(3,000) 1,200 600 1,200
Transfer Noi’s loan to absorb (42,000) 19,000 8,000
the debit balance 15,000

Partners with credit balances in (15,000) 15,000
capital were liable for the debit (27,000)
balance in capital 19,000 8,000

27,000 (19,000) (8,0-00)

* all partners paid off liabilities on behalf of the partnership

Allocation of Noi (3,000x2/5) = 1,200 baht
= 600 baht
Allocation of Nhong (3,000x1/5) =
1,200 baht
Allocation of Ning (3,000x2/5) 3,000 baht

Total loss allocation

Accounting for Partnership Page 192

General Journal Page…..…..
Credit
25x1 Transactions A/C Debit
MD 80,000 -
No. 84,000 - 60,000 -
Jun 30 Cash 8,000 - 200,000 -
Allowance for doubtful account 101 40,000 -
Fixtures – Acc. Depreciation 104 83,200
Capaital – Noi 107 41,600 -
Capital – Nhong 301 83,200 -
Capital – Ning 302
Account Receivables 303
Inventories 103
Fixtures 105
Sale of assets, loss sharing 106

Account Payables 201 124,000 -
Cash 101
124,000 -
Paid third party liabilities, partially

Account Payables 201 3,000 -
Capital – Noi 301
Capital – Nhong 302 1,200 -
Capital – Ning 303 600 -
1,200 -
All partners paid off the remaining liabilities on
behalf of the partnership

Loan – Noi 202 15,000 -
Capital – Noi 301
15,000 -
Transfer Noi’s loan to absorb debit balance in
capital (partially)

Capital – Nhong 302 19,000 -
Capital - Ning 303 8,000 -
301
Capital - Noi 27,000 -
Partners with credit balances in capital were liable
for the deficit of debit balance capital Page 193

Accounting for Partnership

Example 9 One, Two and Three were partners, they shared the profit and loss at 2 : 1 : 2. They agreed
to dissolve the partnership, the realization of other assets was 199,800 baht. If the partnership was in
insolvency situation, all partners should be liable for all remaining liabilities. In case any partner
had debit balance in capital and could not make cash payment to the partnership, the other partners with
credit balances in capital would be liable for such remaining debit balance in capital.

The trial balance of the partnership As on April 30, 2014, the date of dissolution were as follow:

Cash 5,400.- 244,400.-
Other Assets 699,600.- 170,000.-
Account Payables 159,600.-
Capital – One 705,000.- 131,000.-
Capital – Two 705,000.-
Capital – Three

Requirements 1. Calculate the profit and loss sharing to each partner
2. Prepare the statement of partnership liquidation
3. Make entries in general journal

Calculation of profit and loss from the sale of assets: = 699,600 baht
Book value of assets other than cash = 199,800 baht
Sale of assets and collection of receivables = 499,800 baht
Loss from the sale of assets
= 199,920 baht
Calculation of allocation of loss from the sale of assets: = 99,960 baht
Loss allocated to One (499,800x2/5) = 199,920 baht
Loss allocated to Two (499,800x1/5) 499,800 baht
Loss allocated to Three (499,800x2/5)
Total loss allocation

Accounting for Partnership Page 194

One Two Three Partnership

Statement of Partnership Liquidation

As on April 30, 2014

Assets Partners’ Equity

Description Cash Other Liabilities One Two Three
Assets

Profit and Loss Sharing Ratio 2/5 1/5 2/5

Balance before liquidation 5,400 699,600 244,400 170,000 159,600 131,000

Sale of assets, and loss allocation

from sale 199,800 (699,600) (199,920) (99,960) (199,920)

205,200 244,400 (29,920) 59,640 (68,920)

Paid third party liabilities (205,200) (205,200)

- 39,200 (29,920) 59,640 (68,920)

All partners paid off liabilities on

behalf of the partnership * (39,200) 15,680 7,840 15,680

(14,240) 67,480 (53,240)

Debit balances in capital of One and

Ta transferred to Two 14,240 (67,480) 53,240

* all partners paid off liabilities on behalf of the partnership at 2 : 1 : 2

Loss allocation of One (39,200x2/5) = 15,680 baht
7,840 baht
Loss allocation of Two (39,200x1/5) = 15,680 baht
39,200 baht
Loss allocation of Three (39,200x2/5) =

Total loss allocation

The entries in the general journal:

Accounting for Partnership Page 195

General Journal Page…..…..

25x1 Transactions A/C Debit Credit
MD No. 699,600 -

Apr 30 Cash 101 199,800 -
Capaital – One 301 199,920 -
Capital – Two 302 99,960 -
Capital – Three 303 199,920 -
Other Assets 104
Sale of assets, loss sharing 205,200 -
Account Payables 201
Cash 101 205,200 -
Paid third party liabilities, partially

Account Payables 201 39,200 -
Capital – One 301
Capital – Two 302 15,680 -
Capital – Three 303 7,840 -
15,680 -
All partners paid off the remaining liabilities on
behalf of the partnership

Capital – Two 302 67,480 -
Capital – One 301
Capital – Three 303 53,240 -
14,240 -
Deficits in One and Three’s capitals transferred to
Two

Accounting for Partnership Page 196

2. Liquidation of a Partnership by Installment

The repayment by installment method has the same criteria as the single repayment. Sale
of assets, pay off the liabilities, and make capital repayment to all partners. The entity has many items
of assets which cannot be completely sold in one time, but rather take time in the sale of assets. The
partners may request that the payments be made against each sale. These guideline to be followed:

1. First sale of assets, allocate the profit and loss from the sale
2. Pay the liabilities and expenses in the liquidation
3. Each installment shall be handled like the last payment. The liquidator shall plan for

any possible loss incurred, to cover all cases to be mentioned afterward
4. Each installment required detailed calculation until the capital account of all
partners have the balances at the same ratios of the profit and loss sharing ratios. Then
the repayment will be according to the profit and loss sharing ratios, without detailed
calculation attachment. Since the balance in capital account of each partner can cover
the possible loss sharing.

Assumptions for the Installment

1. All available assets may be realized as nothing. To be calculated as total loss.
2. Any partner with debit balance in capital cannot contribute more cash to cover this deficit.

Calculation of Each Installment

The detailed calculation of installment shall be according to these steps:
1. Balances of capital account after paying liabilities shall be used
2. Possible losses from all assumptions to be deducted from the capital balances. The net
amounts will be the installment for all partners.

Example 10 The following are the trial balance of B S J Partnership before the liquidation on March 1,
25x1

Cash 36,000 70,000
Other Assets 350,000 90,000
Account Payables 164,000
Capital – B 386,000 62,000
Capital – S 386,000
Capital – J

Accounting for Partnership Page 197

The three partners shared the profit and loss at 1 : 2 : 1. The partnership liquidation had the

following details:

September 30 Sale of assets, book value of 150,000 baht, realized 110,000 baht

Paid liabilities, first cash installment

October 31 Sale of assets, book value of 120,000 baht, realized 88,000 baht

Second cash installment

November 30 Sale of all remaining assets, realized 64,000 baht

Last capital repayment

Requirements Prepare the statement of partnership liquidation and make entries in

general journal

Calculation of profit and loss from the sale of assets in September:

Book value of assets other than cash = 150,000 baht
110,000 baht
Sale of assets during September = 40,000 baht

Loss from the sale of assets =

Calculation of allocation of loss from the sale of assets: = 10,000 baht
Loss allocated to B (40,000x1/4) = 20,000 baht
Loss allocated to S (40,000x2/4) = 10,000 baht
Loss allocated to J (40,000x1/4))
Total loss allocation 40,000 baht

B S J Partnership

Detailed Calculation of First Cash Installment

As on September 30, 2014

Capital - B Capital - S Capital - J
52,000
Balance before repayment 80,000 144,000
(50,000)
Less Possible loss from unsellable 2,000

available assets (50,000) (100,000)

First cash installment 30,000 44,000

Accounting for Partnership Page 198

Calculation of profit and loss from the sale of assets in October:

Book value of assets other than cash = 120,000 baht
88,000 baht
Sale of assets during October = 32,000 baht

Loss from the sale of assets = 8,000 baht
16,000 baht
Calculation of allocation of loss from the sale of assets: = 8,000 baht
Loss allocated to B (32,000x1/4) = 32,000 baht
Loss allocated to S (32,000x2/4) =
Loss allocated to J (32,000x1/4))
Total loss allocation

BSJ Partnership

Detailed Calculation of Second Cash Installment

As on October 31, 2014

Capital - B Capital - S Capital - J
42,000
Balance before repayment 42,000 84,000
(20,000)
Less Possible loss from unsellable 22,000

available assets (20,000) (40,000)

Second cash installment 22,000 44,000

Calculation of profit and loss from the sale of assets in November:

Book value of assets other than cash = 80,000 baht
64,000 baht
Sale of remaining assets = 16,000 baht

Loss from the sale of assets =

Calculation of allocation of loss from the sale of assets: = 4,000 baht
Loss allocated to B (16,000x1/4) = 8,000 baht
Loss allocated to S (16,000x2/4) = 4,000 baht
Loss allocated to J (16,000x1/4))
Total loss allocation 16,000 baht

Accounting for Partnership Page 199

B S J Partnership

Statement of Partnership Liquidation

During September 30 – November 30, 2014

Assets Partners’ Equity

Description Cash Other Liabilities B S J
Assets

Profit and Loss Sharing Ratios 1/4 2/4 1/4

Balance before liquidation 36,000 350,000 70,000 90,000 164,000 62,000

First sale of assets, and loss allocation

from sale at 1:2:1 110,000 150,000 (10,000) (20,000) (10,000)

146,000 200,000 70,000 80,000 144,000 52,000

Paid third party liabilities (70,000) (70,000)

76,000 200,000 80,000 144,000 52,000

First cash installment (76,000) (30,000) (44,000) (2,000)

200,000 50,000 100,000 50,000

Second sale of assets, and loss

allocation from sale at 1:2:1 88,000 (120,000) (8,000) (16,000) (8,000)

88,000 80,000 42,000 84,000 42,000

Second cash installment (88,000) (22,000) (44,000) (22,000)

80,000 20,000 40,000 20,000

Sale of remaining assets, and loss 64,000 (80,000) (4,000) (8,000) (4,000)
allocation from sale

64,000 16,000 32,000 16,000

Last capital repayment (64,000) (16,000) (32,000) (16,000)

Accounting for Partnership Page 200

The entries in the general journal:

General Journal Page…..…..

25x1 Transactions A/C Credit
MD Debit

No.

Sep 30 Cash 101 110,000 -
Capital – B 301 10,000 -
Capital – S 302 20,000 -
Capital – J 303 10,000 -
Other Assets 104 150,000 -
First sale of assets, loss sharing

Account Payables 201 70,000 -
Cash 101 70,000 -

Paid third party liabilities

Capital – B 301 30,000 -
Capital – S 302 44,000 -
Capital – J 303 2,000 -
101 76,000 -
Cash
First cash installment

Oct 31 Cash 101 88,000 -
Capital – B 301 8,000 -
Capital – S 302 16,000 -
Capital – J 303 8,000 -
Other Assets 104 120,000 -
Second sale of assets, loss sharing

Oct 31 Capital – B 301 22,000 -
Capital – S 302 44,000 -
Capital – J 303 22,000 -
Cash 101 88,000 -
Second cash installment

Accounting for Partnership Page 201

General Journal Page…..…..
Credit
25x1 Transactions A/C Debit
MD 80,000 -
No. 64,000 -
Nov 30 Cash 4,000 -
Capital – B 101 8,000 -
Capital – S 301 4,000 -
Capital – J 302
Other Assets 303
Last sale of assets, loss sharing 104

Capital – B 301 16,000 -
Capital – S 302 32,000 -
Capital – J 303 16,000 -
101
Cash 64,000 -
Last capital repayment

Summary
Partnership dissolution means cease of operation of the partnership. The liquidation will be carried out
and capital repayment to all partners shall be made. Causes of partnership dissolution are described in
the partnership agreement, upon the occurrence of such case the partnership shall be dissolved. Or
when a partner dies, becomes bankrupt or incompetent, or the partnership has had net loss from
operation continuously. Required forms and attachments for registering of the partnership liquidation
shall be prepared. All activities shall be carried out according to the sequence of the partnership
liquidation.

e-Learning Sources
www.dbd.go.th
www.fap.or.th
www.google.com

Accounting for Partnership Page 202

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…………………………………………………………………….