Chapter 12, Problem 12.3AP

(a)

To determine

Partnership: An association of more than one party with the objective of sharing profit and losses is called partnership. It is one form of business organization where risk is shared among two or more partners for their mutual benefit. The liability of partners is unlimited in partnership. Partnership can be easily formed because the process is simple and there less complexities in legal rules.

Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

Accounting rules for journal entries:

• To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
• To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

Process of Liquidation: It is the process of closing the business and distributing all assets to partners. The liquidation happens when any partner dies bankrupt or by mutual consent among partners. The firm curtails its scale of operation and shut down the business.

Ledger Account: Ledger account is an accountings book in which the debit entries are shown at the left side of the account and credit entries are shown at the right side of the account. It can be termed as principal book.

To prepare: The journal entries to record the transactions.

(b)

To determine

To prepare: Cash and capital ledgers.

(c)

(1)

To determine

To prepare: Journal entries.

(2)

To determine

To prepare: Journal entries.