On August 1, SS and UR pooled their assets to form a partnership, with the firm to take over their business assets and assume the liabilities. Partnership capitals are to be based on net assets transferred after the following adjustments: The inventory of UR is to be increased by P4,000; an allowance for doubtful accounts of P1,000 and P1,500 is to be set up in the books of SS and UR, respectively; and accounts payable is to be recognized in SS’s books. Profits and losses are allocated equally. The individual trial balances on August, before adjustments follow: SS UR Assets P75,000 P113,000 Liabilities 5,000 34,000 Required: Prepare the journal entries to record the adjustments in the books of SS and UR.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
On August 1, SS and UR pooled their assets to form a
to take over their business assets and assume the liabilities. Partnership capitals
are to be based on net assets transferred after the following adjustments: The
inventory of UR is to be increased by P4,000; an allowance for doubtful accounts
of P1,000 and P1,500 is to be set up in the books of SS and UR, respectively;
and accounts payable is to be recognized in SS’s books.
allocated equally.
The individual
SS UR
Assets P75,000 P113,000
Liabilities 5,000 34,000
Required: Prepare the
SS and UR.
Step by step
Solved in 2 steps
