Partnerships: Formation, Operation, and Changes in Membership

(Baker Ch. 15 dan Beams Ch. 16)

The Nature of The Partnership Entity

Partnership adalah bentuk bisnis yang populer karena mudah dibentuk dan memungkinkan beberapa
individu menggabungkan bakat dan keterampilan mereka dengan cara tertentu.

Partnership :

1. From an accounting viewpoint, the partnership is a separate business entity.

2. Although many partnerships account for their operations using accrual accounting, others use the
cash basis or modified cash basis of accounting. (These alternatives are allowed because
partnership records are maintained for the partners and must reflect their information needs)

Definition of a Partnership

Section 202 of the UPA 1997 states that “. . . the association of two or more persons to carry on as co-
owners of a business for profit forms a partnership. . . .”

1. Association of two or more persons. The “persons” are usually individuals; however, they also
may be corporations or other partnerships.
2. To carry on as co-owners. This means that each partner has the apparent authority, unless
restricted by the partnership agreement, to act as an agent of the partnership for transactions in the
ordinary course of business of the kind carried on by the partnership. These transactions can
legally bind the partnership to third parties.
3. Business for profit. A partnership may be formed to perform any legal business, trade, profession,
or other service. However, the partnership must attempt to make a profit; therefore, not-for-profit
entities such as fraternal groups may not be organized as partnerships.

Formation of a Partnership

Pada partnership harus ada persetujuan dalam bentuk perjanjian partnership antara kedua belah pihak
untuk menghindari terjadinya permasalahan di masa mendatang. Dalam perjanjian partnership, harus
mencakup beberapa item, yaitu :
 1. The name of the partnership and the names of the partners.
2. The type of business to be conducted by the partnership and the duration of the partnership
agreement.
3. The initial capital contribution of each partner and the method by which to account for future
capital contributions.
4. A complete specification of the profit or loss distribution, including salaries, interest on capital
balances, bonuses, limits on withdrawals in anticipation of profits, and the percentages used to
distribute any residual profit or loss.
5. Procedures used for changes in the partnership, such as admission of new partners and the
retirement of a partner.
6. Other aspects of operations the partners decide on, such as each partner’s management rights and
the election procedures and accounting methods to use.

Other Major Characteristics of Partnerships

1. Partnership agreement
2. Partnership as a separate entity → Partnership adalah entitas bisnis terpisah yang berbeda dari
partner nya. Konsep entitas ini berarti partnership dapat menggugat atau menjadi digugat dan
bahwa propertinya adalah milik partnership, bukan milik perseorangan.
3. Partner as an agent of the partnership → Setiap partner adalah agen partnership untuk transaksi
yang dilakukan dalam kegiatan biasa bisnis partnership kecuali partner tidak memiliki
wewenang untuk bertindak atas nama partnership dalam hal khusus itu dan pihak ketiga
mengetahui atau telah menerima pemberitahuan bahwa partner tsb tidak memiliki otoritas.
4. Statement of partnership authority → A statement of partnership authority menjelaskan
partnership dan mengidentifikasi otoritas khusus dari seorang partner untuk bertransaksi jenis
bisnis tertentu atas nama partnership.
5. Partner’s liability is joint and several. → Semua partner bertanggung jawab atas semua
kewajiban partnership kecuali ditentukan lain oleh undang-undang. Dalam hal dimana
partnertship gagal dan kekayaannya tidak cukup untuk membayar kewajibannya, partner wajib
memberikan kontribusi kepada partnertship menurut proporsi dimana mereka berbagi kerugian
pada partnertship.
6. Partner’s rights and duties → Setiap partner harus memiliki akun modal yang menunjukkan
jumlah kontribusinya pada partnership, setelah dikurangi kewajiban, dan bagian partner dari
keuntungan atau kerugian partnership, dikurangi distribusi apa pun.
 7. Partner’s transferable interest in the partnership → Di bawah pendekatan entitas untuk
partnership yang dinyatakan dalam act, partner bukanlah pemilik bersama dari properti
partnership apa pun. Ini berarti bahwa satu-satunya kepentingan yang dapat dialihkan dari
seorang partner adalah bagiannya dari keuntungan dan kerugian partnership dan hak untuk
menerima distribusi, termasuk setiap distribusi likuidasi.
8. Partner’s disassociation → Pemisahan partner berarti bahwa partner tidak dapat lagi bertindak
atas nama perusahaan. Seorang partner dipisahkan dari kepartneran ketika salah satu peristiwa
berikut ini terjadi: (a) dia memberikan pemberitahuan kepada partnership tentang keinginannya
secara tegas untuk menarik diri sebagai rekanan, (b) Firma mengeluarkan dia atau dia dari firma
sesuai dengan perjanjian partnership, biasanya karena melanggar sebagian dari perjanjian
partnership atau kelanjutannya menjadi melawan hukum, (c) salah satu dari beberapa keputusan
yudisial terjadi (seperti partner melakukan pelanggaran materi perjanjian kepartneran atau terlibat
dalam pelanggaran serius perbuatan yang merugikan partnership secara material dan merugikan),
(d) sekutu menjadi debitur dalam keadaan pailit, atau (e) sekutu meninggal dunia.

Types of Limited Partnerships

a. Limited Partnerships (LP)

A limited partnership (LP) has at least one general partner and one or more limited partners.
General partner secara pribadi bertanggung jawab atas kewajiban partnership dan memiliki
tanggung jawab manajemen. Limited partner hanya bertanggung jawab sejauh kontribusi modal
mereka tetapi tidak memiliki kewenangan atas manajemen.
b. Limited Liability Partnerships (LLP)
Limited liability partnership (LLP) is one in which each partner has some degree of liability
shield. LLP tidak punya general/limited partner dimana setiap partner punya hak dan kewajiban
seperti general partner tapi mereka tu limited legal liability. Namun, ada yang menyatakan juga
bahwa mereka bertanggung jawab atas seluruh legal liability (kec. yg disebabkan oleh
malpractice atau prfessional neglience atas partner yang lain).
c. Limited Liability Limited Partnership (LLLP)
In most states, a limited partnership may elect to become a limited liability limited partnership.
Pada LLLP, setiap partner bertanggung jawab hanya untuk kewajibkan bisnis yang terkait dengan
partnership aja tapi bukan untuk kelakukan dari malpractive atau kesalahan yang diakibatkan oleh
partner lainnya. Jadi, disini ada general dan limited partner namun bedanya, general partner
disini punya hak atas manajemen tapi dia limited liability (gapunya personal liability atas
kewajiban dari partnership).
Accounting for The Information of Partnership

Setiap partner harus menyetujui persentase ekuitas yang akan dimiliki masing-masing dalam net aset
partnership. Umumnya, caapital balance ditentukan oleh bagian proporsional dari kontribusi modal
masing-masing partner. For example, if A contributes 70 percent of the net assets in a partnership with B,
then A will have a 70 percent capital share and B will have a 30 percent capital share. Sebagai pengakuan
atas intangible factors, seperti keahlian khusus partner atau koneksi bisnis yang diperlukan,
bagaimanapun, partner dapat menyetujui pembagian modal secara proporsional. Oleh karena itu, sebelum
mencatat kontribusi initial capital, semua partner harus menyetujui penilaian aset bersih dan bagian
modal masing-masing partner.

Illustration of Accounting for Partnership Formation

Alt needs additional technical assistance to meet increasing sales and offers Blue an interest in the
business. Alt and Blue agree to form a partnership. Alt’s business is audited, and its net assets are
appraised. The audit and appraisal disclose that $1,000 of liabilities have not been recorded, inventory has
a market value of $9,000, and the equipment has a fair value of $19,000.

Alt and Blue prepare and sign a partnership agreement that includes all significant operating policies.
Blue will contribute $10,000 cash for a one-third capital interest. The AB Partnership is to acquire all of
Alt’s business and assume its debts.

Jurnal utk catat initial capital contribution di partnership’s books :

Notes :

- Cash → 3,000 Alt + 10,000 Blue

- Inventory dan Equipment → Pakai market value
- Liability → 10,000 + 1,000 (yang tidak ke-record ternyata)
- Blue capital → (13,000 + 9,000 + 10,000 – 11,000) x 1/3 yang sdh diketahui di soal itu ada
tulisan one-third

Initial Investment in Partnership

Initial investments in a partnership are recorded in capital accounts maintained for each partner. Cth. If
Ash and Bec each invest $20,000 cash in a new partnership, they record the investments as follows:

atau bisa juga

Cash 40,000

Ash capital 20,000

Bec capital 20,000

Noncash Investments

When property other than cash is invested in a partnership, the noncash property is recorded at the fair
value of the property at the time of the investment.
Jurnal :

Bonus or Goodwill on Initial Investments

A valuation problem arises when partners agree on relative capital interests that are not aligned with their
investments of identifiable assets. For example, Col and Cro could agree to divide initial partnership
capital equally, even though Col contributed $50,000 in identifiable assets and Cro contributed $42,000.
(ini bisa terjadi karna mungkin aja yang 42,000 itu kontribusi talentnya dia, waktu, dll → ga hanya berupa
aset fisik/uang).

Jadi, berdasarkan informasi yang ada, kan berarti mereka 50% - 50% sedangkan, kalau di implied total
assets di partnership berarti 50,000/50% = 100,000 → 100,000 – 50,000 – 42,000 = 8,000 →
unidentifiable asset. The partnership agreement specifies equal capital interests, so we should adjust the
capital account balances of Col and Cro to meet the agreement’s conditions.

a. Bonus approach → the unidentifiable asset is not recorded on the partnership books
 o Karena identifiable contributed capital adalah 92,000 dan dibagi 2 secara rata berarti tiap
partner itu capitalnya 46,000. Maka harus dilakukan adjustment capital supaya angkanya
46,000
b. Goodwill approach → the unidentifiable asset contributed by Cro is measured on the basis of
Col’s $50,000 investment for a 50 percent interest

Accounting for The Operations of A Partnership

Partners’ Accounts

1. Capital Account → A partner’s initial investment, any subsequent capital contributions, profit or
loss distributions, and any withdrawals of capital are ultimately recorded in the partner’s capital
account. Each partner has one capital account, which usually has a credit balance. Tapi bisa juga
capital account ini di debit yang menunjukkan adanya defisiensi (mungkin krn ada loss dll)
dimana kalau gini cara eliminasinya adalah harus menambahkan capital/modal lagi.
2. Drawing Accounts → Partners generally withdraw assets from the partnership during the year in
anticipation of profits. Contoh, the following entry is made in the AB Partnership’s books for a
$3,000 cash withdrawal by Blue on May 1, 20X1:

Noncash drawings should be valued at their market values at the date of the withdrawal, and the
related gain or loss should be recognized by the partnership.
3. Loan accounts → A partnership may look to its present partners for additional financing. Any
loans between a partner and the partnership should always be accompanied by proper loan
documentation such as a promissory note. A loan from a partner is shown as a payable on the
partnership’s books, the same as for any other loan. Unless all partners agree otherwise, the
partnership is obligated to pay interest on the loan to the individual partner. The partnership
 records interest on loans as an operating expense. Alternatively, the partnership may lend money
to a partner in which case it records a loan receivable from the partner. Contoh, the following
entry is made to record a $4,000, 10 percent, one-year loan from Alt to the partnership on July 1,
20X1:

Allocating Profit or Loss to Partners

Profit or loss is allocated to the partners at the end of each period in accordance with the partnership
agreement. A wide range of profit distribution plans can be found in the business world. Some
partnerships have straightforward distribution plans, while others have extremely complex distribution
formulas. It is the accountant’s responsibility to distribute the profit or loss according to the partnership
agreement regardless of how simple or complex that agreement is. Profit distributions are recorded
directly in the partner’s capital accounts and are not treated as expense items. Most partnerships use one
or more of the following distribution methods:

1. Preselected ratio → ratios for profit distributions may be based on the percentage of total
partnership capital, time, and effort invested in the entity, or a variety of other factors. Small
partnerships often split profits evenly among the partners. (intinya kalau ini berdasarkan ratio
dmn ratio ini ga selalu berdasarkan ratio kepemilikan gt, intinya rationya sdh ditentukan).
2. Interest on capital balances. → the partners divide some or all of the $100,000 among themselves
based on the relative balances they have maintained in their capital accounts (ini berdasarkan
capital balancenya brp yg dimiliki).
3. Salaries to partners
4. Bonuses to partners.
→ If one or more of the partners’ services are important to the partnership, the profit distribution
agreement may provide for salaries or bonuses. Think of a salary as a fixed amount of company
profits allocated to a given partner and a bonus as a portion of profits allocated to a partner based
on a predetermined performance formula. Think of a salary as a fixed amount of company profits
allocated to a given partner and a bonus as a portion of profits allocated to a partner based on a
predetermined performance formula.

Illustrations of Profit Allocation

During 20X1, the AB Partnership earned $45,000 of revenue and incurred $35,000 in expenses, leaving a
profit of $10,000 for the year. Alt maintains a capital balance of $20,000 during the year, but Blue’s
capital investment varies during the year as follows:

The debits of $3,000 and $1,000 are recorded in Blue’s drawing account; the additional investment of
$500 is credited to her capital account.

Arbitrary Profit-Sharing Ratio

Alt and Blue could agree to share profits in a ratio unrelated to their capital balances or to any other
operating feature of the partnership. For example, assume the partners agree to share profits or losses in
the ratio of 60 percent to Alt and 40 percent to Blue. Some partnership agreements specify this ratio as 3:2
(i.e., 3/5 to Alt and 2/5 to Blue). The following schedule illustrates how the net income is distributed
using a 3:2 profit-sharing ratio:

This schedule shows how net income is distributed to the partners’ capital accounts. The actual
distribution is accomplished by closing the Income Summary account. In addition, the drawing accounts
are closed to the capital accounts at the end of the period.

- Tutup akun drawing

- Tutup revenue dan expense

 - Distribusi profit ke masing2 partner (dengan cara ditutup ke income summary)

Interest on Capital Balances

The partnership agreement may provide for an allocation of profits based on the partners’ capital balances
and refer to this allocation as “interest” on capital investments to provide for a fixed return on investment.
As stated earlier, interest calculated on partners’ capital is generally a form of profit distribution. The
calculation is made after net income has been determined in order to decide how to distribute the income.

Particular caution must be exercised when interest on capital balances is included in the profit distribution
plan. For example, the amount of the distribution can be significantly different depending on whether the
interest is computed on beginning capital balances, ending capital balances, or average capital
balances for the period. For example, Blue’s weighted-average capital balance for 20X1 is computed as
follows:

Notes : ini kan menghitung bal. capital jadi dicari rata2nya berapa si balance per bulannya. (mksdnya dari
situ kayak jan – jun brrt bal. nya 10,000, dst)

Assume Alt and Blue agree to allocate profits first based on 15 percent of the weighted-average capital
balances and then to allocate any remaining profit based on a 60:40 ratio; the distribution of the $10,000
profit would be calculated as follows:
Notes :

- Interest on average capital

 Alt = 20,000 x 15%
 Blue = 8,000 x 15%
- Residual income
 Alt = 60% x 5,800
 Blu = 40% x 5,800

Salaries

To illustrate the allocation of partnership profit based on salaries, assume that the partnership agreement
provides for fixed allocations of $2,000 to Alt and $5,000 to Blue. Any remainder is to be distributed in
the profit and loss–sharing ratio of 60:40 percent. The profit distribution is calculated as follows:

Bonuses

Bonuses are sometimes used to provide additional compensation to partners who have provided services
to the partnership and are typically stated as a percentage of income either before or after subtracting the
bonus. Contoh, to illustrate the difference between a bonus based on partnership profits before and a
bonus after subtracting the bonus, assume that a bonus of 10 percent of income in excess of $5,000 is to
be credited to Blue’s capital account before distributing the remaining profit. In Case 1, the bonus is
computed as a percentage of income before subtracting the bonus amount. In Case 2, the bonus is
computed as a percentage of income after subtracting it.

- Ini bonusnya ga mengurangi Net income

- Bonusnya mengurangi Net income

Distribution based on case 2:

Multiple Profit Allocation Bases

Changes in Membership

Changes in the membership of a partnership occur with the addition of new partners or the disassociation
of present partners.

General Concepts to Account for a Change in Membership in the Partnership

Frequently, a partnership’s existing assets are undervalued when a partner joins the partnership. The
difficulty lies in recording the admission of additional partners in a manner that is fair and equitable to all
parties involved. Two main methods for recording the admission of a new partner to a partnership are,

1. The bonus method → this method records an increase in the partnership’s total capital only for the
fair value of the the new partner investment. In some cases, the existing partners assign some of their
existing capital as a bonus to a new partner (presumably because that new partner brings expertise or
assets that are highly valuable to the partnership). In other cases, a new partner agrees to assign a
portion of his or her capital contribution as a bonus to the existing partners (presumably to
compensate them for the unrecognized appreciation in tangible assets for unrecorded intangible
assets developed by the existing partners).
2. The revaluation method → The practices of recognizing increases in a partnership’s existing net
assets using the revaluation method, or recognizing previously unrecorded goodwill (sometimes
called the goodwill recognition method).
Both methods require the partnership to make journal entries based on fair value estimates. The problem
with making journal entries based on estimates is that should the estimates not materialize in the future,
inequalities among the partners can arise.

New Partner Purchases Partnership Interest Directly from an Existing Partner

An individual may acquire a partnership interest directly from one or more of the existing partners. In
this type of transaction, cash or other assets are exchanged outside the partnership, and the only entry
necessary on its books is a reclassification of the partnership’s total capital. Cth. a new partner, Cha,
could purchase Blue’s entire partnership interest directly from her (as depicted in the diagram) →
remove Blue’s capital account from the books with a debit and transfer the balance to Cha’s new capital
account with a credit.

Jurnal :

Blu’s Capital xx

Cha’s Capital xx

This type of transaction focuses solely on a transfer of the selling partner’s share of the partnership’s book
value to the new partner. Jadi, angka tidak ada yang berubah, cm ganti nama pemilik.

To provide a more complex example, assume that after operations and partners’ withdrawals during 20X1
and 20X2, AB Partnership has a book value of $30,000 and profit percentages on January 1, 20X3, as
follows:
The following information describes the case:

1. On January 1, 20X3, Alt and Blue invite Cha to become a partner in their business. The resulting
partnership will be called the ABC Partnership.
2. Cha purchases a 25 percent interest in the partnership capital directly from Alt and Blue for a total
cost of $9,000, paying $5,900 to Alt and $3,100 to Blue. Cha will have a capital credit of $7,500
($30,000 × 0.25) in a proportionate reclassification from Alt and Blue’s capital accounts.
3. Cha will be entitled to a 25 percent interest in the partnership’s profits or losses. The remaining
75 percent interest will be divided between Alt and Blue in their previous profit ratio of 60:40
percent. The resulting profit and loss percentages after Cha’s admission follow:

Jurnal :

- Cha, capital = 25% x 30,000

In this case, the capital credit to Cha is only $7,500, although $9,000 is paid for the 25 percent interest.
The $9,000 payment implies that the fair value of the partnership is $36,000. The partnership’s book
value is $30,000 before Cha’s investment. The $9,000 payment is made directly to the individual partners,
but it does not become part of the firm’s assets. The $6,000 difference between the partnership’s fair value
and its new book value could be due to understated assets or to unrecognized goodwill.

Recognizing Fair Value Increases in the Partnership’s Net Assets (Non-GAAP)

Assume that Alt and Blue decide to use the evidence from Cha’s investment to recognize increases in fair
values of the nonfinancial long-lived assets that have taken place before Cha’s admission. For example, if
the partnership has land undervalued by $6,000 and sells it after Cha is admitted to the partnership, she
will share in the gain on the sale according to the profit ratio. To avoid this possible problem, some
partnerships revalue the assets at the time a new partner is admitted even if the new partner purchases the
partnership interest directly from the present partners. In this case, Alt and Blue could recognize the
increase in the value of the land immediately before Cha’s admission and allocate the increase to their
capital accounts in their 60:40 profit ratio, as follows:

- Jadi, akun yang undervalued td direvalued dulu.

- Abisitu baru, jurnal masuknya si Cha ini dengan angka capital yang sudah ke-adjust.

New Partner Invests in Partnership

A new partner may acquire a share of the partnership by investing in the business. In this case, the
partnership receives the cash or other assets.

Three cases are possible when a new partner invests in a partnership:

a. Case 1: The new partner’s investment equals the new partner’s proportion of the partnership’s
book value.
b. Case 2: The investment is for more than the new partner’s proportion of the partnership’s book
value. This fact could indicate that the partnership’s prior net assets are undervalued on the books
or that unrecorded goodwill exists.
c. Case 3: The investment is for less than the new partner’s proportion of the partnership’s book
value. This fact could indicate that the partnership’s prior net assets are overvalued on its books
or that the new partner may be contributing goodwill in addition to other assets.

The first step in determining how to account for the admission of a new partner is to compute the new
partner’s proportion of the partnership’s net book value as follows:

The accounting for the admission of a new partner parallels the accounting for an investment in the stock
of another company. If a new partner pays more than book value, the excess of cost over book value—that
is, the positive differential—may be due to unrecognized goodwill or to undervalued assets, the same
cases as in accounting for the differential for stock investments. If book value equals the investment cost,
no differential exists, indicating that the book values of the net assets equal their fair values. If the new
partner’s investment is less than the proportionate book value—that is, an excess of book value over cost
exists—the assets of the partnership may be overvalued. A concept unique to partnership accounting is the
use of the bonus method
Case 1: Investment Equals Proportion of the Partnership’s Book Value

The partnership’s total book value before the admission of the new partner is $30,000, and the new
partner, Cha, is buying a 25 percent capital interest for $10,000.

The amount of a new partner’s investment is often the result of negotiations between the existing partners
and the prospective partner. As with any acquisition or investment, the investor must determine its market
value. In a partnership, the prospective partner attempts to ascertain the market value and earning power
of the partnership’s net assets. The new partner’s investment is then a function of the percentage of
partnership capital being acquired. In this case, Cha must believe that the $10,000 investment required is
a fair price for a 25 percent interest in the resulting partnership; otherwise, she would not make the
investment.

After the amount of investment is agreed on, it is possible to calculate the new partner’s proportionate
book value. For a $10,000 investment, Cha will have a 25 percent interest in the partnership, as follows:

Because the amount of the investment ($10,000) equals the new partner’s 25 percent proportionate book
value ($10,000 = $40,000 × 0.25), there is an implication that the net assets are fairly valued.
 - Jurnal untuk catat investment baru dr si Cha (bentuknya cash)

Summary :

Case 2: New Partner’s Investment More than Proportion of the Partnership’s Book Value

For example, assume Cha invests $11,000 for a 25 percent capital interest in the ABC Partnership. The
first step is to compare her investment with her proportionate book value, as follows:

Generally, an excess of investment over the respective book value of the partnership interest indicates that
the partnership’s prior net assets are undervalued or that the partnership has some unrecorded goodwill.
Two alternative accounting treatments can be used in this case:

1. Revaluation method → the partnership’s assets (tangible

and/or intangible) are revalued upward either to recognize
unrecorded excess value or to record previously
unrecorded goodwill. Thus, the size of the “pie” the
 partners are to divide among themselves becomes larger, so that the “slice” for each becomes
proportionately larger.

2. Bonus method → this method is used when the partners do not

wish to record adjustments in asset and liability accounts or
recognize goodwill. Thus, the size of the pie stays the same (the
book value of existing equity plus the contribution of the new
partner), but one or more partners will give some of his or her
“slice” to the other partners.

The partnership may use either of the two alternatives. The decision is usually a result of negotiations
between the existing partners and the prospective partner.

Illustration of Revaluation Approach (Non-GAAP) – Assume that Cha paid a $750 excess ($11,000 –
$10,250) over her proportionate book value because the partnership owns land on which it has
constructed warehouse buildings. The land has a book value of $4,000, but a recent appraisal indicates
that it has a market value of $7,000. The partnership expects to continue using the land for warehouse
space for as long as the business operates. The increase in land value is allocated to the partners’ capital
accounts in the profit and loss ratio that existed during the time of the increase. Alt’s capital increases by
$1,800 (60 percent of the $3,000 increase), and Blue’s capital increases by $1,200 (40 percent of the
$3,000).

Cha’s $11,000 investment brings the partnership’s total resulting capital to $44,000, as follows:
Cha is acquiring a 25 percent interest in ABC Partnership’s total resulting capital. Her capital credit, after

The entry to record Cha’s admission into the partnership follows:

Illustration of Goodwill Recognition (Non-GAAP) – An entering partner may pay an extra amount to
compensate the existing partners for unrecognized goodwill, indicated by the partnership’s high
profitability. Some partnerships use the change in membership as an opportunity to record unrecognized
goodwill created by the existing partners. Recording unrecognized goodwill is used for partnership
accounting to establish appropriate capital equity among the partners. For example, in this case, Cha is
investing $11,000 for a 25 percent interest. Therefore, she must believe the total resulting partnership
capital is $44,000 The estimated ($11,000 ÷ 0.25). goodwill is $3,000:
The unrecorded goodwill is recorded, and the original partners’ capital accounts are credited for the
increase in assets. The adjustments to the capital accounts are in the profit and loss ratio that existed
during the periods the goodwill was developed. This increased Alt’s capital by 60 percent of the goodwill
and Blue’s by 40 percent. The entries to record goodwill and the admission of Cha are as follows:

Another reason for recording goodwill is that the new partner

may want her capital balance to equal the amount of
investment made. The investment is based on the
partnership’s market value, and for this equality to occur, the
partnership must restate its previous net assets to their fair
values.

Notes : kalau ini, jadi keseluruhan itu di revalued dulu,

dimana kan dibilang tambahan 11,000 utk 25% jadi bisa dicari 100% nya berapa → uda dpt kan 44,000
sedangkan total capital saat ini hanya 41,000 (30,000 + 11,000) → ada selisih dimana selisih ini bisa
diakui sbg goodwill.

Illustration of Bonus Method (GAAP) – Some partnerships are averse to recognizing asset revaluations
or unrecorded goodwill when a new partner is admitted because recognition of these items violates
GAAP. Instead, they record a portion of the new partner’s investment as a bonus to the existing partners
to align the capital balances properly at the time of the new partner’s admission (following GAAP).

In this case, the $750 excess Cha paid is a bonus

allocated to the original partners in their profit and
loss ratio of 60 percent to Alt and 40 percent to Blue.
ABC Partnership’s total resulting capital consists of
$30,000 existing capital of Alt and Blue plus the
$11,000 investment of Cha. No additional capital is
recognized by revaluing assets. Because the partners do not revalue the balance sheet, they simply divide
the existing (small) pie based on their relative ownership percentages.

Notes : Jadi, kalau bonus method ini, keseluruhan capital itu tidak di revalued → jadi yaudah langsung aja
30,000 + 11,000 = 41,000 lalu bagian dari partner baru dihitung dari situ.

Case 3: New Partner’s Investment Less than Proportion of the Partnership’s Book Value

It is possible that a new partner may pay less than his or her proportionate share of the partnership’s book
value. For example, assume Cha invests $8,000 for a 25 percent capital interest in the ABC Partnership.
The first step is to compare the new partner’s investment with her proportionate book value, as follows:

The fact that Cha’s investment is less than the book value of a 25 percent interest in the partnership
indicates that the partnership has overvalued net assets or the original partners recognize that Cha is
contributing additional value in the form of her expertise or skills that the partnership needs.

Summary :
Illustration of Revaluation of Net Assets Approach (GAAP) – Assume that the reason Cha paid only
$8,000 for a 25 percent interest in the partnership is that equipment used in current production is recorded
at a book value of $14,000 but has a fair value of only $8,000. The partners agree to recognize the
impairment loss and write down the equipment to its fair value before the new partner’s admission. The
write-down is allocated to the original partners in the profit and loss ratio that existed during the period of
the decline in the equipment’s fair value: 60 percent to Alt and 40 percent to Blue. The write-down is
recorded as follows:

- Alt capital = 60% x 6,000

- Blue capital = 40% x 6,000

Note that the partnership’s total capital has now been

reduced from $30,000 to $24,000 as a result of the $6,000
write-down. The value of Cha’s share of ABC
Partnership’s total resulting capital, after the write-down,
is calculated as follows:
Jurnal :

Illustration of Recording Goodwill for New Partner (Non-GAAP) – The original partners may offer Cha
a 25 percent capital interest in the ABC Partnership for an $8,000 investment because she has essential
business experience, skills, customer contacts, reputation, or other aspects of goodwill that she will bring
into the partnership.

Use the new partner to estimate goodwill to original

partners; use them to estimate goodwill to the new
partner. Cha’s capital account balance will be 25 percent of
the newly revalued partnership balance sheet, $10,000.

Jurnal :

Illustration of Bonus Method (GAAP) – The $1,500 bonus is

the difference between Cha’s $9,500 book value and her
$8,000 investment. The original partners’ capital accounts
are reduced by $1,500 in their profit and loss ratio of 60 percent for Alt and 40 percent for Blue, and
Cha’s capital account is credited for $9,500, as follows:

Summary :

Determining a New Partner’s Investment Cost

When determining the new partner’s investment cost, it is important to note the partnership’s total
resulting capital and the percentage of ownership interest the existing partners retain. In this example,
they retain a 75 percent interest in the resulting partnership, for which their 75 percent capital interest is
$33,000, the $30,000 of existing capital plus the $3,000 from the revaluation of the land, as follows:
In some cases, the bonus amount may be determined prior to determining the new partner’s required cash
contribution. For example, assume that Alt and Blue agree to give Cha a bonus of $1,500 for joining the
partnership. The following schedule determines the cash investment amount required of Cha, the new
partner:

Disassociation of a Partner from the Partnership

When a partner retires or withdraws from a partnership, that partner is disassociated from the partnership.
In most cases, the partnership purchases the disassociated partner’s interest in the partnership for a buyout
price.

1. Buyout Price Equal to Partner’s Capital Credit

Assume Alt retires from the ABC Partnership when his capital account has a balance of $55,000 after
recording all increases in the partnership’s net assets including income earned up to the date of the
retirement. All partners agree to $55,000 as the buyout price of Alt’s partnership interest. The entry
made by the ABC Partnership is
 If the partnership is unable to pay the total of $55,000 to Alt at the time of retirement, it must
recognize a liability for the remaining portion.

2. Buyout Price Higher than Partner’s Capital Credit

Assume Alt has a capital credit of $55,000 and all the partners agree to a buyout price of $65,000.
a. Hitung selisih kerugian 65,000 – 55,000 = 10,000
b. Hitung persentase saat ini tanpa Alt (karna udah keluar)

c. Alokasi 10,000 berdasarkan persentase kepemilikan yang tadi

d. Buat jurnal retirement

Occasionally, a partnership uses the retirement of a partner to record unrecognized goodwill. In this
case, the partnership may record the retiring partner’s share only, or it may impute the entire amount
of goodwill based on the retiring partner’s profit percentage. If it imputes total goodwill, the
remaining partners also receive their respective shares of the total goodwill recognized.
For example, if $65,000 is paid to Alt and only his share of unrecognized goodwill is to be recorded,
the partnership makes the following entries at the time of his retirement:
3. Buyout Price Less than Partner’s Capital Credit
Sometimes, the buyout price is less than a partner’s capital credit. This could result if liquidation
values of net assets are less than their book values or because the disassociating partner wishes to
leave the partnership badly enough to accept less than his or her current capital balance. If no
revaluations of the net assets are necessary, then the $5,000 difference ($50,000 cash paid less
$55,000 capital credit) is distributed as a capital adjustment to Blue and Cha in their respective
profit and loss ratio.

- Blue capital : 55% x 5,000

- Cha capital : 45% x 5,000