Partnership Operations2 (1)

PARTNERSHIP OPERATIONS

Essentially the same as the operations of a sole proprietorship

“Wealth is not what you have but what you are”

• Purchase of merchandise• Purchases xxx

• Accounts payable xxx

• Sale of merchandise• Accounts receivable xxx

• Sales xxx

• Payment of payables• Accounts payable xxx

• Cash xxx

• Collection of receivables• Cash xxx

• Accounts receivable xxx

• Expenses incurredExpenses xxx

Expenses payable/Cash xxx

The following is the list of income and expense accounts of JJJ Partnerships as of year end December 31, 2011.

Freght in 7,500• Merchandise, Jan. 1 50,000• Purchase discount 8,000• Purchases 300,000• Rent expense 10,000• Sales 800,000• Sales discount 12,000• Salaries & wages 90,000• Sales returns &• Allowances 4,500

Supplies expense 9,500Taxes and licensesExpense 15,000Utilities expense 60,000

Additional InformationMerchandise inventory,

Dec. 31 26,500

Close all the nominal accounts of JJJ Partnership and compute the balance of the Income Summary Account.

• 1. Close revenue accounts

• Sales 800,000• Sales discount 12,000• Sales returns and allowances 4,500• Income summary 783,500

• 2. Close cost of sales account

• Income summary 349,500• Purchase discount 8,000

• Purchases 300,000• Freight in 7,500• Merchandise inventory, Jan. 1 50,000

• 3Close the operating expenses account• Income summary 184,500

• Rent expense 10,000• Salaries and wages 90,000• Supplies expenses 9,500• Taxes and license expense 15,000• Utilities expense 60,000• .

• Set up merchandise inventory, end

• Merchandise inventory, Dec. 31 26,500• Income summary 26,500

INCOME SUMMARY

783,500 349,500 26,500 184,500 _______

534,000 810,000 Bal. 276,000

• Income summary 276,000• James, drawing 92,000• John, drawing 92,000• Jude, drawing 92,000

• James, drawing 92,000• John, drawing 92,000• Jude, drawing 92,000

• James, capital 92,000• John, capital 92,000• Jude, capital 92,000

DISTRIBUTION OF PROFITS

RULES ON DISTRIBUTION OF PROFITS

• CAPITALIST PARTNERS• DIVISION OF PROFITS

• IN ACCORDANCE WITH THE AGREEMENT• IN THE ABSENCE OF AN AGREEMENT, ACCORDING TO

ORIGINAL CONTRIBUTION• DIVISION OF LOSSES

• IN ACCORDANCE WITH THE AGREEMENT• IF THE AGREEMENT IS ONLY ON DIVISION OF PROFITS, THE

DIVISION OF LOSSES IS THE SAME WITH THE AGREEMENT ON THE DIVISION OF PROFITS

• IN THE ABSENCE OF ANY AGREEMENT, ACCORDING TO ORIGINAL CONTRIBUTION

• INDUSTRIAL PARTNERS

• DIVISION OF PROFITS• IN ACCORDANCE WITH THE AGREEMENT• IN THE ABSENCE OF AN AGREEMENT,

• A JUST AND EQUITABLE SHARE OF THE PROFITS• OTHER CAPITALIST PARTNERS WILL RECEIVE PROFITS

ACCORDING TO THEIR ORIGINAL CONTRIBUTION

• CAPITALIST - INDUSTRIAL PARTNERS

• DIVISION OF PROFITS• IN ACCORDANCE WITH THE AGREEMENT• IN THE ABSENCE OF AN AGREEMENT,

• AS AN INDUSTRIAL PARTNER - A JUST AND EQUITABLE SHARE OF THE PROFITS

• AS A CAPITALIST PARTNER, TOGETHER WITH THE OTHER CAPITALIST PARTNERS, WILL RECEIVE PROFITS ACCORDING TO ORIGINAL CONTRIBUTION TOGETHER WITH THE OTHER CAPITALIST PARTNERS

• CAPITALIST - INDUSTRIAL PARTNERS

• DIVISION OF LOSSES• IN ACCORDANCE WITH THE AGREEMENT• IN THE ABSENCE OF AN AGREEMENT,

• AS AN INDUSTRIAL PARTNER, SHALL HAVE NO SHARE IN THE LOSSES

• AS A CAPITALIST PARTNER WILL SHARE IN THE LOSSES ACCORDING TO ORIGINAL CONTRIBUTION TOGETHER WITH THE OTHER CAPITALIST PARTNERS

Net income is P400,000.• Maria, capital

Jan. 1 200,000Mar. 1 50,000 Aug. 31 100,000Oct.1 20,000 Dec. 1 150,000 70,000 450,000 Bal. 380,000

• Martha, capital

• Jan. 1 400,000• Feb. 1 10,000 May 31 50,000• July1 30,000 Nov. 1 100,000• 40,000 550,000• Bal. 510,000

No Agreement

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MARIA MARTHA TOTALOriginal contrihution 133,333.33 266,666.67 400,000.00

133,333.33 266,666.67 400,000.00

Income Summary 400,000.00 Maria, drawing 133,333.00 Martha, drawing 266,667.00

To distribute the net income between partners Maria and Martha

Beginning balance

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MARIA MARTHA TOTAL200/600/ ; 400/600 133,333.33 266,666.67 400,000.00

133,333.33 266,666.67 400,000.00

Income Summary 400,000.00 Maria, drawing 133,333.00 Martha, drawing 266,667.00

To distribute the net income between partners Maria and Martha

Ending balance

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MARIA MARTHA TOTAL380/890; 510/890 170,786.52 229,213.48 400,000.00

170,786.52 229,213.48 400,000.00

Income Summary 400,000.00 Maria, drawing 170,786.52 Martha, drawing 229,213.48

To distribute the net income between partners Maria and Martha

Simple Average balamces

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MARIA MARTHA TOTALBeginning balances 200,000 400,000 600,000 Ending Balances 380,000 510,000 890,000 Total 580,000 910,000 1,490,000 Divided by 2 2 2 Average capital balances 290,000 455,000 745,000

290/745 ; 455/745 155,705 244,295 400,000 Income Summary 400,000

Maria, drawing 155,705 Martha, drawing 244,295

To distribute the net income between partners Maria and Martha

Weighted Average Balance

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NO. OFPESO NO. OFPESOMARIA MOS. MOS MARTHA MOS. MOS

1-Jan 200,000 2 400,000 Jan. 1 400,000 1 400,000 1-Mar 150,000 6 900,000 Feb. 1 390,000 4 1,560,000

Aug. 31 250,000 1 250,000 May 31 440,000 1 440,000 Oct. 1 230,000 2 460,000 July 1 410,000 4 1,640,000 Dec. 1 400,000 1 400,000 Nov. 1 510,000 2 1,020,000

12 2,410,000 5,060,000 / 12 / 12

Average capital 200,833 421,667

MARIA MARTHA TOTAL

200,833/622,500 129,049 129,049

421667/622500 270,951 270,951

129,049 270,951 400,000

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPITAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

2/3 ; 1/3 133,333.33 66,666.67 200,000.00

Income summary 200,000.00

Martin, drawing 133,333.00

Isidore, drawing 66,666.67

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPITAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

2/3 ; 1/3 133,333.33 66,666.67 200,000.00

Income summary 200,000.00

Martin, drawing 133,333.00

Isidore, drawing 66,666.67

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPIAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

Interest - 5% 50,000.00 25,000.00 75,000.00

Balance, equally 62,500.00 62,500.00 125,000.00

Total 112,500.00 87,500.00 200,000.00

Income summary 200,000.00Martin, drawing 112,500.00

Isidore, drawing 87,500.00

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPIAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

Salaries 60,000.00 72,000.00 132,000.00

Interest - 5% 50,000.00 25,000.00 75,000.00

Balance, 2:1 (4,666.67) (2,333.33) (7,000.00)

105,333.33 94,666.67 200,000.00

Income summary 200,000.00Martin, drawing 105,333.33

Isidore, drawing 94,666.67

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPIAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

Loss- P50,000 (33,333.33) (16,666.67) (50,000.00)

Martin, drawing 33,333.33

Isidore, drawing 16,666.67

Income summary 50,000.00

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPIAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

Loss- P50,000 (33,333.33) (16,666.67) (50,000.00)

Martin, drawing 33,333.33

Isidore, drawing 16,666.67

Income summary 50,000.00

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPIAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

Interest - 10% 100,000.00 50,000.00 150,000.00

Balance, equally (100,000.00) (100,000.00) (200,000.00)

0.00 (50,000.00) (50,000.00)

Isidore, drawing 50,000.00

Income summary 50,000.00

Martin and Isidore

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MARTIN ISIDORE TOTAL

CAPIAL BALANCES P 1,000,000.00 P 500,000.00 P 1,500,000.00

Salaries 120,000.00 144,000.00 264,000.00

Interest - 10% 100,000.00 50,000.00 150,000.00

Balance, equally (309,333.33) (154,666.67) (464,000.00)

(89,333.33) 39,333.33 (50,000.00)

Martin, drawing 89,333.33

Isidore, drawing 39,333.33

Income summary 50,000.00

1.

MEC PARTNERSHIP Statement of Financial Position

June 30, 2012

ASSETS LIABILITIES &PARTNERS' EQUITYCash P 175,000 Liabilities P 108,000 Other assets 495,000 Margaret, capital 250,000

Elizabeth, capital 200,000 Cecilia, capital 112,000

Toal P 670,000 Total P 670,000

1. Interest on ending capital of 10%.2. Annual salaries of P120,000 each to Elizabeth and Decilia3.. Remainder: Margaret – 40%; Elizabeth – 30% and Cecilia – 30%

MARGARET ELIZABETH CECILIA TOTALInterest - 10% 12,500 10,000 5,600 28,100 Annual salaries 60,000 60,000 120,000 Remainder 40,760 30,570 30,570 101,900

53,260 100,570 96,170 250,000

Income Summary 250,000 Margaret, drawing 53,260 Elizabeth, drawing 100,570 Cecilia, drawing 96,170 Distribution of profits