Scribd
Upload
476 views

Accounting For Special Transactions

The document discusses accounting for partnership liquidation. It outlines the order of priorities for settling claims during liquidation as outside creditors first, then inside creditors, and then owners' interests. It also explains the procedures for accounting for lump-sum versus installment liquidation and the order of priority for marshalling a partner's personal assets to settle any capital deficiency.

Uploaded by

john carlo
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
476 views

Accounting For Special Transactions

The document discusses accounting for partnership liquidation. It outlines the order of priorities for settling claims during liquidation as outside creditors first, then inside creditors, and then owners' interests. It also explains the procedures for accounting for lump-sum versus installment liquidation and the order of priority for marshalling a partner's personal assets to settle any capital deficiency.

Uploaded by

john carlo
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 11

ACCOUNTING FOR SPECIAL

TRANSACTIONS
(Advanced Accounting 1)

LECTURE AID

2018

ZEUS VERNON B. MILLAN


Chapter 4 - Partnership Liquidation

Learning Objectives

• State the order of priorities in cases of


liquidation.
• Account for the liquidation of a
partnership.

ACCOUNTING FOR SPECIAL


TRANSACTIONS (Advanced
Accounting 1) - (by: MILLAN)
Partnership Liquidation

• Liquidation is the termination of business operations or the


winding up of affairs. It is a process by which
a. the assets of the business are converted into cash,
b. the liabilities of the business are settled, and
c. any remaining amount is distributed to the owners.

ACCOUNTING FOR SPECIAL


TRANSACTIONS (Advanced
Accounting 1) - (by: MILLAN)
Methods of liquidation

1. Lump-sum liquidation – the partners’ claims are settled in a


single, lump-sum payment after all non-cash assets are realized
and after all liabilities are settled.

2. Installment liquidation – the partners’ claims are settled on an


installment basis as non-cash assets are realized and as cash
becomes available, but only after all liabilities are fully settled.

ACCOUNTING FOR SPECIAL


TRANSACTIONS (Advanced
Accounting 1) - (by: MILLAN)
Settlement of claims

• The available cash of the partnership is used to settle claims in the


following descending order:
1. First, to outside creditors;
2. Second, to inside creditors (e.g., payables to partners);
3. Third, to owners’ interests

ACCOUNTING FOR SPECIAL


TRANSACTIONS (Advanced
Accounting 1) - (by: MILLAN)
Lump-sum vs. Installment liquidation

The following procedures shall be observed when accounting for lump-


sum liquidation or installment liquidation:

ACCOUNTING FOR SPECIAL


TRANSACTIONS (Advanced
Accounting 1) - (by: MILLAN)
Lump-sum vs. Installment liquidation (Cont’n.)

ACCOUNTING FOR SPECIAL


TRANSACTIONS (Advanced
Accounting 1) - (by: MILLAN)
Marshalling of assets

• A partner who is solvent, shall be required to make additional


contributions to settle any deficiency in his capital balance, subject
to the following order of priority over his personal assets:
1. The partner’s separate creditors
2. The partnership creditors
3. To the other partners by way of contribution

• The capital deficiency of an insolvent partner shall be offset to the


capital credits of the other partners.

ACCOUNTING FOR SPECIAL


TRANSACTIONS (Advanced
Accounting 1) - (by: MILLAN)
APPLICATION OF CONCEPTS
 

PROBLEM 2: FOR CLASSROOM DISCUSSION

ACCOUNTING FOR SPECIAL TRANSACTIONS (Advanced Accounting 1) - (by:


MILLAN)
OPEN FORUM
QUESTIONS????
REACTIONS!!!!!

ACCOUNTING FOR SPECIAL TRANSACTIONS (Advanced Accounting 1) - (by:


MILLAN)
END
ACCOUNTING FOR SPECIAL TRANSACTIONS (Advanced Accounting 1) - (by:
MILLAN)

You might also like