01 Handout 1(4)
by @rossel_910
36
0
1
Jul 6, 2026
About this deck
This deck includes 36 flashcards covering new partner, recorded upon, upon partnership, and related concepts. Use it to review key Business ideas, focus on weak cards, and prepare for your exam with StudyLess.
Study this deck in StudyLess
Save to your library and review with FSRS spaced repetition.
Flashcards
36 total- 01
What is the definition of a partnership according to Article 1767 of the New Civil Code?
A contract where two or more persons contribute money, property, or industry to a common fund with the intention of dividing profits among themselves, or for the exercise of their profession.
- 02
What are the characteristics of a partnership?
Voluntary agreement, mutual contribution, co-ownership of assets, mutual agency, unlimited liability, limited life, and division of profits.
- 03
What is the characteristic of a partnership that means each partner is an agent to other partners?
Mutual agency
- 04
What does unlimited liability mean for a partner?
Each partner is personally liable for all partnership debts, and creditors may claim personal assets if partnership assets are exhausted.
- 05
What is the primary purpose of a partnership?
To earn profits and divide them among the partners according to the partnership agreement.
- 06
What are the three possible scenarios in forming a partnership?
1. Two or more persons form a partnership. 2. Sole proprietor and individuals form a partnership. 3. Two or more sole proprietors form a partnership.
- 07
What is the preferred form for a partnership contract?
A written contract, specifically a public instrument if immovable or real rights are contributed.
- 08
What is the document known as the written contract of a partnership?
Articles of Co-Partnership
- 09
What is the minimum required content for the Articles of Co-Partnership?
Name, partners' names/addresses, effectivity date, nature/purpose/office, capital contributions and values, rights/duties, provisions for investments/withdrawals, profit-sharing, bookkeeping, dissolution procedures, and arbitration.
- 10
How are cash contributions recorded upon partnership formation?
At their face value.
- 11
How are non-cash assets recorded upon partnership formation if there is no agreement?
Generally at their fair values at the time of contribution.
- 12
How are liabilities recorded upon partnership formation?
At their present value.
- 13
What are common methods for distributing profits or losses among partners?
Equally, in an arbitrary ratio, in the ratio of capital balances, with allowance for interest on capital, with allowance for salary/bonus, or a combination of interest, salary, and bonus.
- 14
What is the general rule regarding stipulations that exclude partners from profit/loss share?
Such stipulations are void, except for industrial partners being excluded from losses.
- 15
What is the order of profit and loss distribution if not explicitly agreed upon?
First, according to agreement. If only profit share is agreed, losses are in the same proportion. If no agreement, in proportion to capital contribution.
- 16
How are industrial partners to share in profits?
They shall receive a just and equitable share, and if they have contributed capital, they also receive a share in proportion to their capital.
- 17
How is dissolution defined in the context of a partnership?
A change in the relation of the partners caused by any partner ceasing to be associated with the partnership.
- 18
What is the difference between dissolution and liquidation?
Dissolution ends the association of individuals for their original purpose but does not necessarily terminate the business or interrupt continuity. Liquidation is the winding up of partnership affairs and termination of the business.
- 19
What accounting adjustments are made upon dissolution?
All assets and liabilities are adjusted to their current market values and present values, respectively, after allocating income or loss.
- 20
What are the two main methods for accounting for the admission of a new partner when their investment differs from their capital credit?
Bonus Method and Goodwill Method.
- 21
What is the core principle of the Bonus Method for admitting a new partner?
Net assets are recorded at historical cost. Total contributed capital (TCC) equals total agreed capital (TAC), implying a bonus is given to old or new partners.
- 22
Under the Bonus Method, when is a bonus given to the old partners?
When the capital credit of the new partner is less than his/her capital contribution.
- 23
Under the Bonus Method, when is a bonus given to the new partner?
When the capital credit of the new partner is greater than his/her capital contribution.
- 24
What is the emphasis of the Goodwill Method for admitting a new partner?
The legal significance of a change in capital structure, recognizing the creation of a new legal entity and recording contributed assets at fair market value, potentially recognizing goodwill.
- 25
Under the Goodwill Method, when is goodwill recognized for the old partners?
When the new partner contributes more than the proportionate book value of the new entity.
- 26
How is the death or withdrawal of a partner treated similarly to admission?
The same accounting treatment applies, but there is no new capital account to be recorded.
- 27
What happens when partners transfer existing capital to a buying partner?
No entry is made in the partnership books; the consideration goes directly between the selling and buying partners, resulting in a personal gain or loss for the selling partner.
- 28
What is liquidation in the context of a partnership?
The winding up of the partnership business, involving selling all non-cash assets, paying liabilities, and making final settlements to partners.
- 29
What are the four basic steps in partnership liquidation?
1. Allocate net income/loss to capital accounts. 2. Allocate gain/loss from sale of non-cash assets to capital accounts. 3. Pay creditors and liquidation expenses. 4. Distribute remaining cash to partners based on capital account balances.
- 30
How are loans between a partnership and a partner handled during liquidation?
They are offset to the partner's capital account (right of offset).
- 31
How is the deficit of an insolvent partner allocated during liquidation?
The deficit is allocated to the remaining solvent partners' capital accounts based on their P&L ratio.
- 32
What are the two modes of liquidating a partnership?
Lump-sum or Single Distribution Liquidation, and Installment/Piece-Meal Liquidation.
- 33
Describe Lump-sum or Single Distribution Liquidation.
All assets are sold in bulk, creditors are paid, and a single liquidating distribution is made to partners. There's a tendency for greater loss if assets are sold in bulk.
- 34
Describe Installment/Piece-Meal Liquidation.
Assets are sold over a period, and cash is distributed to partners as it becomes available.
- 35
What is the first step in preparing a statement of liquidation for installment liquidation?
Determination of the available cash balance, adjusted for receipts, sales, payments, and expenses.
- 36
What are the two ways to determine which partner receives available cash in installment liquidation?
Cash Priority Program (CPP) and Schedule of Safe Payment.
Related decks
Make your own deck.
Snap a photo of your notes and StudyLess generates flashcards in seconds, then schedules every review backward from your exam date.