war22ech12 accounting partnership revisi

(1)

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Adeng Pustikaningsih, M.Si.

Dosen Jurusan Pendidikan Akuntansi Fakultas Ekonomi

Universitas Negeri Yogyakarta

(2)

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Accounting for

Partnerships

(3)

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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.

(4)

3.

for partner admission and withdrawal.

4.

for liquidating a partnership.

(5)

Describe the basic

characteristics of

proprietorships,

partnerships, and limited

liability companies.

Objective 1

(6)

Advantages

• Simple to form

• Ability to be one’s own

Disadvantages

• Difficulty in raising

large amounts of capital

12-1

A

proprietorship

is a business

enterprise owned by a single individual.

(7)

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

Disadvantages

• Limited life

• Unlimited liability

• Co-ownership of

partnership property

• Mutual agency

12-1

(8)

 An important right of partners is to

participate in the income of the

partnership.

12-1

 A partnership, like a proprietorship, is a

nontaxable entity.

(9)

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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.

(10)

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

(11)

Ease of Formation

Proprietorship

Simple

Partnership

Moderate

CV and Firma

Moderate

Characteristics of

Proprietorships, Partnerships, and CV and firma

12-1

(12)

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12-1

Legal Liability

Proprietorship

No limitation

Partnership

No limitation

Characteristics of

Proprietorships, Partnerships, CV and Firma

(13)

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12-1

Taxation

Proprietorship

Nontaxable*

Partnership

Nontaxable*

CV and Firma

Nontaxable**

*Pass-through entity

**Pass-through entity by election

Characteristics of

(14)

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12-1

Limitation on Life of Entity

Proprietorship

Yes

Partnership

Yes

Characteristics of

(15)

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12-1

Access to Capital

Proprietorship

Limited

Partnership

Limited

CV and Firma

Limited

Characteristics of

(16)

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Describe and illustrate the

accounting for forming a

partnership and for dividing

Objective 2

(17)

Forming a Partnership 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

(18)

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Joko’ Transfer of Assets, Liability, and Equity

12-2

Apr. 1 Cash 7 200 000

Accounts Receivable 16 300 000 Merchandise Inventory 28 700 000

Store Equipment 5 400 000

(19)

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.

(20)

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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

(21)

Follow My Example 12-1

Cash 34,000,000

Inventory 15,000,000

Equipment 29,000,000

Notes Payable 12,000,000

(22)

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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

Dividing Income—Services of Partners

(23)

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J. Sari C. Mono Total

Annual salary allowance Rp 60,000,000 Rp48,000,000 Rp 108,000,000 Remaining income 21,000,000 21,000,000 42,000,000

Division of net income Rp 81,000,000 Rp69,000,000 Rp 150,000,000

12-2

Division of Net Income

to journal entry

(24)

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12-2

The entry for dividing net income is as follows:

Dec. 31 Income Summary 150 000 000

(25)

12-2

Dividing Income—Services of Partners and Investments

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.

(26)

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Division of Net Income

Salary allowance Rp60,000,000 Rp48,000,000 Rp108,000,000 Interest allowance 19,200,000 14,400,000 33,600,000

12-2

Net income of Rp 150,000,000 is divided.

(27)

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Division of Net Income

Salary allowance Rp 60,000,000 Rp 48,000,000 Rp108,000,000 Interest allowance 19,200,000 14,400,000 33,600,000

12-2

12% x Sari’s

capital account balance on Jan. 1 of

Rp 160,000,000

J. Sari C. Mills Total

(28)

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Division of Net Income

J. Sari C. Mono Total

Salary allowance Rp 60,000,000 Rp 48,000,000 Rp 108,000,000 Interest allowance 19,200,000 14,400,000 33,600,000

12-2

(29)

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Division of Net Income 12-2

J. Sari C. Mono Total Salary allowance Rp 60,000,000 Rp48,000,000 Rp108,000,000 Interest allowance 19,200,000 14,400,000 33,600,000 Remaining income 4,200,000 4,200,000 8,400,000 Division of net income Rp 83,400,000 Rp66,600,000 Rp150,000,000

(30)

12-2

(31)

12-2

Jamila Sari, Member Equity 83 400 00 Chandra Mono, Member Equity 66 600 00

(32)

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Assume the same facts as

before except that the net

income is only

12-2

(33)

12-2

Division of Net Income

J. Sari C. Mono 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

Net income of Rp100,000,000 is divided.

This amount exceeds net income by

(34)

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12-2

Division of Net Income

J.Sari C. Mono 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

(35)

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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,

(36)

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Monthly salary Rp 42,000,000 Interest (9% x Rp20,000,000) 1,800,000

Remaining income 91,350,000*

(37)

Describe and illustrate

the accounting for

partner admission

and withdrawal.

Objective 3

(38)

1. Purchasing an interest from one or more of the current partners.

A person may be admitted to a partnership only with the consent of all the current

partners by:

12-3

(39)

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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.

12-3

(40)

12-3

The only entry required in the partnership accounts is as follows:

June 1 Toni Asikin, Capital 10 000 000 Nani Bunga, Capital 10 000 000

(41)

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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 10,000,000

Bunga, Capital 10,000,000

50,000,000

Cahyadi, Capital

(42)

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12-3

Contributing Assets to a Partnership

Partners Dudi Lintang and Guntur Margono have capital balances of

(43)

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12-3

June 1 Cash 20 000 000

Suci Nadera, Capital 20 000 000

(44)

12-3

The effect of the transaction on the partnership accounts is presented in the following diagram:

Partnership Accounts

Lintang, Capital

35,000,000

(45)

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12-3

LLC Alternative

June 1 Cash 20 000 000

(46)

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12-3

Revaluation of Assets

If the asset accounts do not reflect

approximate current market values

when a new partner is admitted, the

accounts should be adjusted

(47)

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.

(48)

June 1 Merchandise Inventory 3 000 000

Dudi Lintang, Capital 1 500 000

Guntur Margono, Capital 1 500 000

12-3

(49)

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.

(50)

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a. Land 60,000,000

Lila Lestari, Capital 20,000,000¹

Tami Kulsum, Capital 40,000,000²

(51)

(52)

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

12-3

(53)

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Juwita and Kurniasari agree to admit Dunia as a partner for Rp31,000,000.

In return, Dunia will receive a one-third equity in the partnership and will share income and losses equally

with Juwita and Kurniasari.

(54)

Equity of Juwita Rp20,000,000 Equity of Kurniasari 24,000,000

Dunia’s Contribution 31,000,000 Total equity after admitting Dunia Rp75,000,000

Dunia’s interest (1/3 x $75,000) Rp25,000,000

Dunia’s contribution Rp31,000,000

(55)

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Mar. 1 Cash 31 000 000

Arif Dunia, Capital 25 000 000

Maryanti Juwita, Capital 3 000 000 Heni Kurniasari, Capital 3 000 000

The entry to record the admission of Dunia to the partnership is as follows:

12-3

(56)

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

12-3 Adjusting for New Partner’s

(57)

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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

The bonus is computed as follows:

(58)

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June 1 Cash 30 000 000

Juwita Cahyani, Capital 5 000 000 Sri Darmawan, Capital 2 500 000

12-3

(59)

12-3

The entry to record the bonus and admission of Chou 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 2/3

(60)

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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 30 000 000

Juwita Cahyani, Capital 5 000 000 Sri Darmawan, Capital 1/3 x 2 500 000

(61)

12-3

Withdrawal of a Partner

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

(62)

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12-3

The following entry is required to record Z selling his interest to Y.

June 1 Z, Capital 30 000 000

Y, Capital 30 000 000

(63)

12-3

If Z had sold his interest

directly to the partnership, both

the assets and the owner’s

(64)

Luki has a capital balance of Rp45,000,000 after adjusting assets to fair market value. Cindy

(65)

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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

(66)

Describe and illustrate

the accounting for

liquidating a

Objective 4

(67)

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When a partnership goes out

of business, the winding-up

process is called the

liquidation

of a partnership.

12-4

(68)

12-4

Liquidation Process

1. Sell the partnership assets. This step is called

realization.

2. Distribute any gains or losses from realization to the partners based upon their

income-sharing ratio.

(69)

(70)

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Cash Rp11,000,000 Noncash Assets 64,000,000

Liabilities Rp 9,000,000 Juju Febriani, Capital 22,000,000

12-4

Liquidation Process

Febriani, Gilang, and Hasanah share income and losses in a ratio of 5:3:2. On April 9, after discontinuing

(71)

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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.

12-4

(72)

Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000 Sale of assets and division of gain +72 000 000 -64 000 000 0 4 000 000 2 400 000 1 600 000

Cash +

Noncash

Assets = Liabilities +

Capital Febriani

(50%) +

Gilang (30%) +

Hasanah (20%) Febriani, Gilang and Hasanah

Statement of Partnership Liquidation For Period April 10-30, 2008

(73)

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Cash 72 000 000

Noncash Assets 64 000 000

Gain on Realization 8 000 000

12-4

Step 1: Sale of assets

(74)

Gain on Realization 8 000 000

Juju Febriani, Capital 4 000 000

Bayu Gilang, Capital 2 400 000

12-4

Step 2: Division of gain

(75)

Liabilities 9 000 00

Cash 9 000 00

12-4

Step 3: Payment of liabilities

(76)

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Juju Febriani, Capital 26 000 000 Bayu Gilang, Capital 24 400 000 Anggi Hasanah, Capital 23 600 000

12-4

Step 4: Distribution of cash to partners

(77)

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.

12-4

(78)

Cash 44 000 000

Loss on Realization 20 000 000

12-4

Step 1: Sale of assets

(79)

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Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000 Sale of assets and division of gain +44 000 000 -64 000 000 0 -10 000 000 -6 000 000 -4 000 000 Balances after realization Rp55 000 000 Rp 0 Rp9 000 000 Rp12 000 000 Rp16 000 000 Rp18 000 000 Payment of liabilities -9 000 000 0 -9 000 000 0 0 0 Balances after payment of liabilities Rp46 000 000 Rp 0 Rp 0 Rp12 000 000 Rp16 000 000 Rp18 000 000 Cash distributed to partners -46 000 000 0 0 -12 000 000 -16 000 000 -18 000 000 Final balances Rp 0 Rp 0 Rp 0 Rp 0 Rp 0 Rp 0

Febriani, Gilang and Hasanah Statement of Partnership Liquidation

For Period April 10-30, 2008

Liabilities +

(50%) +

Gilang (30%) +

Hasanah (20%) Cash +

Noncash Assets =

(80)

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12-4

Step 2: Division of loss

(81)

Cash 9 000 000

12-4

(82)

12-4

Step 4: Distribution of cash to partners:

(83)

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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

(84)

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

(85)

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12-4

Loss on Realization—Capital Deficiency

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

(86)

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Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000 Sale of assets and division of gain +10 000 000 -64 000 000 0 -27 000 000 -16 200 000 -10 800 000 Balances after realization Rp21 000 000 Rp 0 Rp9 000 000 Rp(5 000 000) Rp5 800 000 Rp11 200 000 Payment of liabilities -9 000 000 0 -9 000 000 0 0 0

Febriani, Gilang and Hasanah Statement of Partnership Liquidation

Liabilities +

(50%) +

Gilang (30%) +

Hasanah (20%) Cash +

Loss on Realization— Capital Deficiency

(87)

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12-4

Cash 10 000 000

Loss on Realization 54 000 000

(88)

Step: Payment of liabilities

(89)

12-4

(90)

12-4

Receipt of deficiency

Cash 5 000 000

Juju Febriani, Capital 5 000 000

(91)

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Balances before realization Rp11 000 000 Rp64 000 000 Rp9 000 000 Rp22 000 000 Rp22 000 000 Rp22 000 000 Sale of assets and division of gain +10 000 000 -64 000 000 0 -27 000 000 -16 200 000 -10 800 000 Balances after realization Rp21 000 000 Rp 0 Rp9 000 000 Rp(5 000 000) Rp5 800 000 Rp11 200 000 Payment of liabilities -9 000 000 0 -9 000 000 0 0 0 Balances after payment of liabilities Rp12 000 000 Rp 0 Rp 0 Rp(5 000 000) Rp5 800 000 Rp11 200 000 Receipt of Deficiency 5 000 000 0 0 5 000 000 0 0 Balances Rp17 000 000 Rp 0 Rp 0 Rp 0 Rp5 800 000 Rp11 200 000 Cash distributed to partners -17 000 000 0 0 0 -5 800 000 -11 200 000 Final balances Rp 0 Rp 0 Rp 0 Rp 0 Rp 0 Rp 0

Febriani, Gilang and Hasanah Statement of Partnership Liquidation

Liabilities +

(50%) +

Gilang (30%) +

Hasanah (20%) Cash +

Loss on Realization— Capital Deficiency

12-4

(92)

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Bayu Gilang, Capital 5 800 000 Anggi Hasanah, Capital 11 200 000

Cash 17 000 000

12-4

(93)

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

(94)

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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)

(95)

Prepare the

statement of

partnership equity.

Objective 5

(96)

12-5

Statement of Partnership Equity

The change in the owners’

capital accounts for a period of

time is reported in a

statement

(97)

Balance, January 1, 2008 Rp 245 000 000 Rp 365 000 000 Rp 610 000 000 Capital additions 50 000 000 000 000 50 000 000 Net income for the year 40 000 000 80 000 000 120 000 000 Less partner withdrawals (5 000 000) (45 000 000) (50 000 000) Balance, December 31, 2008 Rp 330 000 000 Rp4 000 000 000 Rp 730 000 000

Chandra capital

Investors Associates

Statement of Partnership Equity For the Year Ended december 31, 2008

(98)

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Financial Analysis and Interpretation

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 Rp220,000,000,000

(99)

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Financial Analysis and Interpretation 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