Accounting 2 (PACOAC) 2016-2017

DON HONORIO VENTURA TECHNOLOGICAL STATE UNIVERSITY
COLLEGE OF BUSINESS STUDIES

Bacolor, Pampanga
ACCTG 2.1- PARTNERSHIP

According to Article 1767 of the Civil Code of the Philippines:
Partnership is defined as “two or more persons binding themselves to contribute money, property or
industry to a common fund with the intention of dividing profits among themselves.”
CHARACTERISTICS OF A PARTNERSHIP
1. Ease of Formation
 Partnership with less than P3, 000.00 capitals only need to register their name with Department of
Trade and Industry DTI.
 Partnership with more than P3, 000.00 capitals must register with Securities and Exchange
Commission (SEC) and the contract must appear in a public instrument.
2. Mutual Contribution- There cannot be a Partnership without contribution of money, property or

industry to a common fund.
3. Division of Profits or Losses- The essence of partnership is that each partner must share in the
profits or losses of the venture.
4. Co- Ownership of Contributed Assets- All assets contributed into the partnership are owned by the
partnership by virtue of its separate and distinct juridical personality. If one partner contributes an
asset to the business, all partners jointly own it in a special sense.
5. Mutual Agency- Any partner can bind the other partners to a contract if he is acting within his
express or implied authority.
6. Limited Life- A partnership has a limited life. It may be dissolved by the admission, death,
insolvency, and incapacity, withdrawal of a partner or expiration of the term specified in the
partnership agreement.
7. Unlimited Liability- All partners (except limited partners) including industrial partners, are
personally liable for all debts incurred by the partnership. If the partnership cannot settle its
obligations, creditors’ claims will be satisfied from the personal assets of the partners without
prejudice to the rights of the separate creditors of the partners.
8. Income Taxes- Partnerships, except general professional partnerships are subject to tax at the rate
of P 30% on taxable income.
ADVANTAGES & DISADVANTAGES OF A PARTNERSHIP
Advantages Disadvantages
More Capital Available Risk of dissolution
Better Management Possibility of Disagreement
More interests in the business Unlimited liability of partners
Simple organization Limited in size
Low taxes General agency
ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 1

Bacolor, Pampanga
A Partnership has access to greater or better

credit standings
ELEMENTS OF PARTNERSHIP
The contract of partnership is:
1. Consensual- it is perfected by mere consent, that is, upon the express or implied agreement
of two or more persons.
2. Bilateral- it is entered into by two or more persons and the rights and obligations arising
there from are always reciprocal.
3. Onerous- each of the parties aspires to procure for himself a benefit through the giving of
something. The partners contribute money, property, or industry to a common fund.
4. Commutative- Undertaking of each of the partner is considered as the equivalent of that
of the others.
ESSENTIAL REQUISITES OF A PARTNERSHIP
1. There must be a valid contract
2. The parties must have legal capacity to enter into the contract
3. There must be a mutual contribution of money, property or industry to a common fund
4. The object must be lawful
5. The purpose or primary purpose must be to obtain profits and to divide the same among
the parties.
THE FOLLOWING CANNOT GIVE THEIR CONSENT TO A CONTRACT OF PARTNERSHIP
1. Unemancipated Minors
2. Insane or demented persons
3. Deaf-mutes who do not know how to write
4. Persons who are suffering from civil interdiction
EFFECTS OF AN UNLAWFUL PARTNERSHIP
1. The contract is void and the partnership never existed in the eyes of the law
2. The profits shall be confiscated in favour of the government
3. The instruments or tools and proceeds of the crime shall also be forfeited in favour of the
government
4. The contributions of the partners shall not be confiscated unless they fall under no. 3
CLASSIFICATIONS OF PARTNERSHIP

Bacolor, Pampanga
A. According to Object:
1. Universal Partnership of all present property- All contributions become part of the partnership fund.
2. Universal Partnership of all profits- All that the partners may acquire by their industry or work
during the existence of the partnership and the use of whatever the partners contributed at the time
of the institution of the contract belong to the partnership.
B. According to Liability:
1. General Partnership- All partners are liable to the extent of their separate
properties.
2. Limited Partnership- The limited partners are liable only to the extent of their
personal contributions. In a limited partnership, the law states that there shall be at
least one general partner.
C. According to Duration:
1. Partnership with a fixed term or for a particular undertaking.
2. Partnership at will- One in which no term is specified and is not formed for any
particular undertaking.
D. According to Purpose:
1. Commercial or Trading Partnership- one formed for the transaction of business.
2. Professional or Non- Trading Partnership- one formed for the exercise of

profession
E. According to Legality of Existence
1. De Jure Partnership- One which has complied with all the legal requirements for
its establishment.
2. De Facto Partnership- One which has failed to comply with all the legal
requirements for its establishment.
KINDS OF PARTNERS
1.) General Partner- One who is liable to the extent of his separate property after all the assets of
the partnership is exhausted.
2.) Limited Partner- One who is liable only to the extent of his capital contribution.
3.) Capitalist Partner- one who contributes money or property to the common fund of the
partnership.

Bacolor, Pampanga
4.) Industrial Partner- One who contributes his knowledge or personal service to the partnership.
5.) Managing Partner- One whom the partners has appointed as manager of the partnership
6.) Liquidating Partner-one who is designated to wind up or settle the affairs of the partnership
after dissolution.
7.) Dormant Partner- One who does not take active part in the business of the partnership and is
not known as a partner.
8.) Silent Partner- One who does not take active part in the business of the partnership though
may be known as a partner.
9.) Secret Partner- One who takes active part in the business but is not known to be a partner by
outside parties.
10.) Nominal Partner or Partner by Estoppel- One who is actually not a partner but who
represents himself as one.
REFERENCES:
Ballada Susan & Ballada, Win. (2014). Partnership & Corporation Accounting. Manila ,
Philippines: Made Easy Books.
De Leon, Hector S. (2014). The Law on Partnerships and Private Corporations. Manila,
Philippines: Rex Book Store
Harina, Ricardo M.. (2014). College Accounting 2. Mandaluyong City: National Book Store
Macapilit, Cecilia. (2014). Partnership & Corporation Accounting and their legal bases. Manila,
Philippines: Rex Book Store Inc.
Soriano, Fidelito R. (2013). Notes in Business Law.Manila, Philippines, GIC Enterprises, Inc.
“LIFE IS THE MOST DIFFICULT EXAM. MANY PEOPLE FAIL BECAUSE THEY
TRY TO COPY OTHERS, NOT REALIZING THAT EVERYONE HAS A DIFFERENT
QUESTION PAPER.
ACCTG 2.2.1- PARTNERSHIP FORMATION

ACCOUNTING FOR PARTNERSHIPS

Bacolor, Pampanga
A Partnership has two or more capital accounts and therefore should also have two or more drawing
accounts. The partners may also have loans to or loan from the partnership which should be clearly
identified.
PARTNER’S LOAN TO THE PARTNERSHIP
A partner may lend money to the partnership. In this case, a debtor-creditor relationship exists. The
loan payable by the partnership to the partner, the loan should be recorded separately because in case of
liquidation, a partner’s loan takes priority over partner’s equity or capital.
PARTNER’S RECEIVABLE ACCOUNT
A partner may also borrow cash or buy on account from the partnership. It is shown as receivable
if the intention of the partner is to pay it later and not a charge against his share in the income of the
partnership business.
ILLSUTRATIVE PARTNERSHIP TRANSACTIONS
1. Cash Contributions ONLY by the partners.
On November 1, Leonora and Teresa decided to form a partnership with P 45, 600 and P 78, 950 cash
respectively:
Date Particulars F Debit Credit
2016
November 1 Cash P 124,550
Leonora, Capital P 45,600
Teresa, Capital 78,950
Cash investments made by

Leonora and Teresa
2. Cash and Non-Cash Contributions by the partners:

Bacolor, Pampanga
When non-cash assets are invested, they should be recorded at its fair value or appraised
value. Fair Market Value is the amount, which the seller will receive for selling non-cash
assets at the present time and its present condition
On December 1, TAMA and GUTCHI formed a partnership, with TAMA investing P 17, 200 cash
and P 32,000 worth of Furniture which was bought 1 year ago and valued now as P 19, 300 and Gutchi
investing 25% cash of Tama’s total invested capital.
2016
December 1 Cash P 26,325
Furniture & Fixtures 19,300
Tama, Capital P 36,500
Gutchi, Capital 9,125
Various investments made

by Tama and Gutchi
3. Cash contributions by one partner and services to be contributed by one partner
On October 1, TAMARA invested cash in the partnership amounting to P 20,000 while REMATA
joined the partnership with his services as a managing partner with an agreement of 10% share in
the income
2016
October 1 Cash P 20,000
Tamara, Capital P 20,000

Bacolor, Pampanga
Investments made by
Tamara
In the case of Remata’s admission as a partner, since He will contribute services to the partnership, NO
JOURNAL ENTRY will be prepared but a MEMORANDUM ENTRY only.
Memorandum Entry:
Admitted Remata as a partner for a 10% share in the income
4. Non-Cash Assets Contributions by the partner with outstanding balance to be assumed by

the partnership.
On September 1, Bugsy invested equipment valued at P 580,000 with an outstanding balance of P

30% of it to be assumed by the partnership.
2016
September 1 Equipment P 580,000
Accounts Payable P 174,000
Bugsy, Capital 406,000
Investments made by
Bugsy with outstanding balance
5. A Sole Proprietor and an Individual form a Partnership

Bacolor, Pampanga
In this case, one of the expected partners is already engaged in business prior to the formation of
the partnership. In this case, the partner may transfer his/her assets and liabilities (net assets) to the
partnership at agreed values or at fair market values if there are no agreed values. The partnership
may either: 1) Use the books of the sole proprietor, or 2) Open new set of books
When individual set of books are kept by each partner or by any one of the partners, entries are
made on the separate books of the partners for adjustments to the recorded values. The adjustments
are made through the Capital Account.
The Capital Account is credited for increases in the value of the net assets and is debited for
decreases in the value of the net assets.
On September 30: CURA and CHARI formed a partnership wherein CURA will contribute cash
while CHARI will transfer its assets and liabilities in the business.
CHARI ATUTO REPAIR SERVICES
STATEMENT OF FINANCIAL POSITION
AUGUST 31, 2016
ASSETS
Current Assets:
Cash P 280, 450

Accounts Receivable 62, 541
Office Supplies 12, 200
Total Current Assets P 355,191
Non- Current Assets:
Computer Equipment P 16, 300

Furniture & Fixtures 18, 600
Total Non-Current Assets P 34,900
TOTAL ASSETS P 390,091

LIABILITIES & OWNER’S EQUITY
Current Liabilities
Accounts Payable P 11, 370

Notes Payable 23, 180

Bacolor, Pampanga
Total Liabilities P 34,550
Owner’s Equity
CHARI, Capital P 355,541
TOTAL LIABILITIES & OWNER’S EQUITY P 390,091
Adjustments:
1. An establishment of Allowance for Doubtful Accounts equivalent to 20% of the Accounts

Receivable should be adjusted.
2. The Computer Equipment should be depreciated by 38%.
3. Furniture & Fixtures should be 24% depreciated.
4. Prepaid Insurance of P 21, 200 and Unearned Rent of P 6,700 are to be recognized.
5. Cura is to contribute cash amounting to P 30% of the adjusted capital of Chari.
Step 1: Adjust the books of the sole proprietor Chari to agreed values.
Page 1
2016
September 1 Chari, Capital P 12,508
Allowance for Doubtful P 12,508

Accounts
To adjust accounts receivable
Accumulated Depreciation-CE P 6,194

Bacolor, Pampanga
To adjust the computer

equipment
Accumulated Depreciation F & F P 4,464
To adjust the Furniture &

Fixtures
September 1 Prepaid Insurance P 21,200
Unearned Rent P 6,700
Chari, Capital 14,500
To adjust the prepaid and

accrued expenses
The Balance of Chari after all the adjustments are made is P 346,875
CHARI, CAPITAL
Date Ref Debit Credit Balance
September 1 Beginning Balance P 355, 541
September 1 AJ1 P 12, 508 P 343,033
September 1 AJ2 P 6,194 P 336, 839
September 1 AJ3 P 4,464 P 332,375
September 1 AJ4 P 14,500 P 346, 875

Bacolor, Pampanga
Step 2: Record the 30% investment of Cura:
Page 1
2016
September 1 Cash P 104,063
Cura, Capital P 104,063
To record the investments

made by Cura
* 30% of P 346,875 = P 104,063
After all the necessary entries have been made, the partnership can now prepare the adjusted
beginning balances of the firm:
CURACHA AUTO REPAIR SERVICES
SEPTEMBER 1, 2016
ASSETS
Current Assets:
Cash P 384, 513

Allowance for Doubtful Accounts (12,508)
Office Supplies 12, 200
Prepaid Insurance 21, 200

Bacolor, Pampanga
Computer Equipment P 16, 300

Accumulated Depreciation-CE (6,194)
Accumulated Depreciation- F & F (4,464)

Current Liabilities

Unearned Rent 6,700
Partner’s Equity
Cura, Capital P 104,063

Chari, Capital 346,875
Total Partner’s Equity P 450,938
TOTAL LIABILITIES & PARTNER’S EQUITY P 492,188
6. Two or More Sole Proprietors form a Partnership
When all the prospective partners are already in the business, they may decide to transfer their assets
and liabilities to the partnership at agreed values upon at fair market values.
HALINA MINI GROCERY STORE
OCTOBER 1, 2016
ASSETS
Current Assets:
Cash P 112, 545

Allowance for Bad Debts (12, 400)

Bacolor, Pampanga
Merchandise Inventory 52, 380
Store Equipment P 35, 500

Accumulated Depreciation-SE (5,917)
Accumulated Depreciation- F & F (5,500)

Current Liabilities

Loans Payable 45, 300
Owner’s Equity
HALINA, Capital P 148,768
MAWRA SARI SARI STORE
OCTOBER 1, 2016
ASSETS
Current Assets:
Cash P 115, 100

Notes Receivable 25, 500
Merchandise Inventory 32, 960

Bacolor, Pampanga
Store Equipment P 26, 350

Accumulated Depreciation-SE (7,905)
Computer Equipment 12, 200
Accumulated Depreciation- CE (5,500)
Current Liabilities

Owner’s Equity
MAWRA, Capital P 127,115
Adjustments are to be made as follows:
1.) Halina’s Allowance for Bad Debts shall be valued at P 20,500.
2.) Merchandise Inventories are to be valued at 130% of their recorded values.
3.) Both Store Equipment are to be depreciated by 40%
Step 1: Adjust the books of both Sole Prorietors.
Page 1

Bacolor, Pampanga
2016
October 1 Halina, Capital P 8,100
Allowance for Bad Debts P 8,100
To adjust accounts receivable
October 1 Merchandise Inventory P 15,714
Halina, Capital P 15,714
To adjust Halina’s Inventory
October 1 Merchandise Inventory P 9,888
Mawra, Capital P 9,888
To adjust Mawra’s Invty
October 1 Halina, Capital P 8,283
Accumulated Depreciation-SE P 8,283
To adjust the Store

Equipment of Halina
October 1 Mawra, Capital P 2,635
Accumulated Depreciation-SE P 2,635
To adjust the Store

Equipment of Mawra
After preparing all the adjustments of Both Sole Proprietors, the next step is to prepare the combined
adjusted Statement of Financial Position of both sole proprietors to form a Partnership.

Bacolor, Pampanga
” Sometimes we need someone to simply be there. Not to fix anything or do anything in
particular, but just to let us feel we are supported and cared about.”
ACCTG 2.2.2- PARTNERSHIP FORMATION

PROBLEM 1:
FREEDOM COMPANY
OCTOBER 15, 2016
ASSETS
Cash P 1.050,000
Accounts Receivable P 260,000
Allowance for Bad Debts (25,000) 235,000
Merchandise Inventory 840,700
Furniture and Fixtures P 550,000
Accumulated Depreciation (90,000) 460,000
TOTAL ASSETS P 2,585,700
LIABILITIES & EQUITY

Freedom, Capital 2,156,100
TOTAL LIABILITIES & EQUITY P 2,585,700
Adjustments on October 31, 2016 are to be made as follows:
4.) The allowance for Bad Debts should be increased by 28%
5.) The Merchandise Inventory should be valued at P 1,200,000
6.) The Furniture and Fixtures should be depreciated by 45%
7.) Notes Payable amounting to P 263,000 were not recorded.

Bacolor, Pampanga
Required:
1. Prepare the Necessary Adjusting entries on the above data.

2. Prepare the Adjusted Statement of Financial Position as of October 31, 2016.
PROBLEM 2:
ARES-TADO KAH ENTERPRISE
JANUARY 31, 2016
ASSETS
Cash P 2, 628,750
Accounts Receivable P 362,810
Allowance for Bad Debts (83,446) 279,364
Notes Receivable 112,410
Merchandise Inventory 499,999
Office Equipment P 450, 600
Accumulated Depreciation (216,288) 234,312
Furniture and Fixtures P 388, 600
Accumulated Depreciation (77, 720) 310,880
TOTAL ASSETS P 4,065,715
Loans Payable 420,553
Mortgage Payable 889,660

Bacolor, Pampanga
Kah, Capital 2,212,610
TOTAL LIABILITIES & OWNER’S EQUITY P 4,065,715
Adjustments on February 1, 2016 are to be made as follows:
1.) The allowance for Bad Debts should be valued at 45% of the Accounts Receivable
2.) Additional cash investments made by KAH amounting to P 120, 300 were not recorded.
3.) The amount of Notes Receivable recognized was not correct, it should be valued only
at P88, 990
4.) Merchandise inventory should be valued at 165%
5.) The Furniture and Fixtures should be depreciated by 35%
6.) Notes Payable amounting to P 263,000 were not recorded.
7.) A new partner named SOO-KUH-NAH-KOO will invest 30% of the adjusted capital of
ARES-TADO KAH.
8.) After the admission of KOO as a new partner, the business will be named “ SOO-KAH
GENERAL MERCHANDISE
Required:
1. Prepare the Necessary Adjusting entries on the above data.

2. Prepare the Adjusted Statement of Financial Position separating current and non-current
portion as of February 1, 2016.
3. Additional Information: Use 111- Cash, 112- Accounts Receivable. 112.1- Allowance for
Bad Debts, 113- Notes Receivable, 114- Merchandise Inventory, 211- Office Equipment,
211.1- Accumulated Depreciation- OE, 212- Furniture and Fixtures, 212.1- Accumulated
Depreciation-F & F, 311- Accounts Payable, 312- Notes Payable, 411- Loans Payable, 412-
Mortgage Payable, 511- Kah, Capital, 512- Koo, Capital

Bacolor, Pampanga
“MAKING DECISION IN LIFE IS DIFFICULT BECAUSE SOMETIMES YOU NEED TO SACRIFICE

EVEN THE MOST IMPORTANT THINGS IN YOUR LIFE.”
ACCTG 2.3.1- PARTNERSHIP OPERATION

DISTRIBUTION OF PROFITS AND LOSSES
In the Distribution of partnership profits and losses, the following factors should be considered:
1. Services rendered by the partners to the partnership
2. Amount of capital contributed by the partners to the business
3. Entrepreneurial ability or managerial skills of the partners.
The distribution of division of profits and losses may be expressed in several ways as follows:
1.) By percentage
2.) By fraction
3.) By decimal
4.) By ratio
RULES FOR DIVIDING PROFITS AND LOSSES
1. As to Capitalist Partners
a.) Division of Profits
a.1) In accordance with agreement
a.2) in the absence of an agreement, division of profits is in accordance with capital

contributions.
b.) Division of losses
a.2) if only division of profits is agreed upon, the division of losses will be the
same as the agreement on the division of profits
a.3) in the absence of an agreement, division of losses is in accordance with capital

contributions.
2. As to Industrial Partners

Bacolor, Pampanga
a.) Division of Profits
a.2) in the absence of an agreement, the industrial partner shall receive a just and
equitable share of the profits and the capitalist partners shall receive profit in
accordance with their capital contributions
b.) Division of losses
a.2) in the absence of an agreement, the industrial partner in his/her character shall
have no share in the losses.
METHODS OF DISTRIBUTING PROFITS BASED ON PARTNER’S AGREEMENT
1.) Equally
2.) Arbitrary Ratio ( Percentage, Decimal, Fraction, Ratio)
3.) Capital Ratio ( Beginning Capital, Average Capital, Ending Capital)
4.) Interest on capital and the balance on agreed ratio
5.) Salary allowances to partners and the balance on agreed ratio
ILLUSTRATIVE PROBLEM:
The following ledger accounts are taken from the books of TOMMY and MIHO Partnership for the year
2016.
TOMMY, CAPITAL
February 1 P 65,000 January 1 P 320, 500
May 1 P 34, 500
October 1 P 55,000
MIHO, CAPITAL
May 1 P 72, 200 January 1 P 400,500
November 1 P 125,800
INCOME SUMMARY

Bacolor, Pampanga
December 31 P 150,000
Case 1: Profit is divided equally
2016
Dec 31 Income Summary P 150,000
Tommy, Capital P 75,000
Miho, Capital 75,000
To record the division of

profits equally
Case 2: Profit is 1/3 and 2/3 to Tommy and Miho
2016

profits 1/3 and 2/3
Case 3: Profit is divided in the ratio of 2:3 to Tommy and Miho
2016

profits in the ratio of 2:3

Bacolor, Pampanga
Case 4: Profit is divided 35% and 65% respectively
2016

profits 35% and 65% respectively
Case 5: Profit is allocated based on the beginning capital ratio
2016

profits based on beginning balances
320,500/721,000 * 150,000 = 66,678
400,500/721,000* 150,000= 83,322
Case 6: Profit is allocated based on the Ending Capital ratio
2016

Bacolor, Pampanga

profits based on ending balances
Computation for the ending balances:
Tommy Miho
Beginning balances P 320,500 P 400,500
Additional Investments 89,500 125,800
Withdrawals ( 65,000) ( 72,200)
Ending Balances P 345,000 P 454,100
345,000/799,100 * 150,000 = 64,761
454,100/799,100* 150,000= 85,239
Case 7: Profit is allocated based on the the average capital ratio
2016

profits based on average capital
balances
Computation for the average capital balances:
Tommy, Capital
Months Capital No. of months Pesos Average Capital

Balance unchanged
January 1-31 P 320,500 1 320,500
February1-Apr 30 P 255,500 3 766,500

Bacolor, Pampanga
May1-September 30 P 290,000 5 1,450,000
October 1-Dec. 31 P 345,000 3 1,035,000
12 3,572,000 297,667
Miho, Capital
Months Capital No. of months Pesos Average Capital

Balance unchanged
January 1-April 30 P 400,500 4 1,602,000
May 1- October 31 P 328,300 6 1,969,800
November 1-Dec 31 P 454,100 2 908,200
12 4,480,000 373,333
297,667/671,000 * 150,000 = 66,543
373,333/671,000* 150,000= 83,457
Case 8: Each partner is allowed 15% interest on ending capital and the remaining income is divided
20% and 80% respectively
2016

profits based on the agreed upon
Computations:
Tommy Miho Total
Interest on Ending Capital:
15% x P 345,000 P 51,750

Bacolor, Pampanga
15% x P 454,100
P 68,115 P 119,865
Remainder ( 20% and 80%
20% x 30,135 P6,027
80% x 30,135 P 24,108 P 30,135
Total P 57,777 P 92,223 P 150,000
Case 9: Miho is allowed salaries of P 120,000 and the remaining profit divided in the ratio of 4:6
2016

Computations:
Tommy Miho Total
Salaries P 120,000 P 120,000
Remainder ( 4:6)
4/10 * P 30,000 P 12,000
6/10 * P 30,000 P 18,000 P 30,000
Total P 12,000 P 138,000 P 150,000
Case 10: Assume same agreement as in case no. 9, but instead of net income of P 150,000, the
partnership incurred a net loss of P 40,000.

Bacolor, Pampanga
2016
Dec 31 Tommy, Capital P 64,000
Miho, Capital P 24,000
Income Summary 40,000

Computations:
Tommy Miho Total
Salaries P 120,000 P 120,000
Remainder ( 4:6)
4/10 * (P 160,000) (P64,000)
6/10 * (160,000) (P96,000) (P 160,000)
Total (P 64,000) P 24,000 (40,000)
EXERCISES
PROBLEM 1:
The Capital Accounts of CHOKS and LATTE at the end of the year 2016 are as follows:
CHOKS CAPITAL
January 1 Balance P 250,000

June 1 Investment P 130,000
November 1 Withdrawal P 83,000
LATTE CAPITAL
January 1 Balance P 170,000

April 1 Investment P 295,000
July 31 Withdrawal P 52, 500

Bacolor, Pampanga
INCOME SUMMARY
December 31 Net Income: P 192,000
Prepare the Journal Entries for the ff. Transactions
1. Profit is divided 70% to Choks and 30% to Latte

2. Profit is divided in accordance with beginning capital
3. Profit is divided based on ending capital
4. Profit is divided based on average capital
5. Salaries of P 45,000 and P 78, 300 are allowed to Choks and Latte respectively, and the balance divided in
the ratio of 3: 5
PROBLEM 2:
In the month of January, 2016, Zuma, Galema and Valentina formed a partnership with respective capital balances:
Zuma, Capital
a.) Zuma invested Cash in the business amounting to 25% of its personal cash of P 800,000, Equipment valued
at P 75,000 4 years ago and subjected to a depreciation of P 10% per year.
b.) Zuma decided to withdraw from his personal account 2 days after the operation amounting to P 8,200 to be
used by him in watching several movies.
Galema, Capital
a.) .Snakers, the friend of Galema decided to lend Galema a money amounting to P 125,000. When Galema
received the borrowed capital, she then gave her mother 37% of which, her 2 siblings 23% of which and the
balance she invested in the business.
b.) Galema made an additional investment in a form of furniture and fixtures amounted to a fair market value
of P 55,000, its historical value is P 73,000.
Valentina, Capital
a.) Valentina made an investment amounting to 35% of the total adjusted capital of Zuma and Galema
After the formation of the partnership, the partners decided that they will base the distribution of net income in a
ratio of 5:4:3 after Valentina will be given P 25,000 monthly salary being the managing partner of the company.
Additional Information was given by the partners: Net income for January is P 88, 300, for February is P 55, 200,
for March, the partnership generated ja net loss of P 65,000 and for April, a net income of P 53,800.

Bacolor, Pampanga
ACCTG 2.4.1- PARTNERSHIP DISSOLUTION

ARTICLE 1828
The Dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing
to be associated in the carrying on as distinguished from the winding up of the business.
ARTICLE 1829
On Dissolution, the partnership is not terminated, but continues until the winding up of the partnership
affairs is completed.
For accounting purposes, the change in the relationship of the partners brought about by the following:
1.) Admission of a new partner by a transfer of old partner to new partner
2.) Withdrawal or retirement of a partner by sale of equity or interest to the remaining partners
3.) Withdrawal or retirement of a partner by sale of equity or interest to a new partner
4.) Death, Insolvency or Incapacity of a partner
ADMISSION OF A NEW PARTNER
A new partner may be admitted into a partnership by purchase of Interest from one or more of the original
(old partners)
ADMISSION BY PURCHASE
With the consent of all the partners, a new partner may be admitted in an existing partnership by purchasing
a capital equity interest directly from one or more of the old partners.
The only entry required on the partnership books is the recording of the transfer of capital from the capital
account of the selling partner to that of the buying partner. The pro-form entry is:
(Name of Seller), Capital
(Name of buyer), Capital
The purchase price of the interest sold to the new partner may be:
1.) Equal to the book value of interest sold

Bacolor, Pampanga
2.) Less than the book value of interest sold
3.) More than the book value of the interest sold.
The new partner may pay more than or less than the book value of the interest sold by the old
partner resulting in a gain or loss in the transaction. The gain or loss is a personal gain or loss of
the selling partner and not of the partnership. Therefore, no gain or loss is recognized in the
partnership books.
Sample Problem: Kolokoy and Butchokoy are partners with capital balances of P 200,000
and P 320,000 respectively on May, 2017. They share profits and losses equally. Bachoy is a
new partner
Case 1: Purchase at book value from one partner only. Bachoy purchases 2/5 interest from
Kolokoy by paying P 80,000.
2017
May 1 Kolokoy, Capital 80,000
Bachoy, Capital 80,000
To record the purchase of interest

from Kolokoy
Case 2: Purchase at book value from more than one partner. Bachoy purchases 2/5 interest
from the Old Partners by paying P 208,000.
2017
Butchokoy, Capital 128,000

from old partners
Case 3: Purchase at less than book value. Bachoy purchases 2/5 interest from the Old Partners
by paying P 190,000.
2017

Bacolor, Pampanga

from old partners
The 190,000 paid by Bachoy to Kolokoy and Butchokoy should not be reflected in the
partnership books because the said amount was paid directly to the partners. The difference
of 18,000 is a personal loss of the selling (old) partners.
Case 4: Purchase at more than book value. Bachoy pays P 200,000 for a 1/3 interest from the
Old Partners.
2017

from old partners
The 200,000 payment made by Bachoy to Kolokoy and Butchokoy should not be reflected in
the partnership books. The P 26,666 excess payment is a personal gain of Kolokoy and
Butchokoy.
SALE OF EQUITY OR INTEREST TO REMAININING PARTNERS
The interest of the retiring partner may be acquired by the remaining partners. The partnership
recognizes only the transfer of capital interest from the retiring partner to the acquiring partner or
partners.
Example: the following are the ending capital balances of the three partners for the month of June
2017
Ding Dong Dhing Dhing
P 45,000 P 32,000 P 36,000

Bacolor, Pampanga
Dong sold his interest to Ding and Dhing Dhing for P30, 000 on June 15; the interest being divided
equally by the remaining partners.
2017
June 15 Dong, Capital 32,000
Ding, Capital 16,000
Dhing Dhing, Capital 16,000
To record the sale of interest to

remaining partners
The loss of 2,000 is a personal loss of Dong since the sale of interest to Ding and Dhing Dhing
is a personal transaction among the partners.
SALE OF EQUITY OR INTEREST TO A NEW PARTNER
With the consent of the remaining partners, the retiring partner may sell his interest to an outsider.
The partner recognizes only the transfer of capital interest from the retiring partner to the new
partner. Any gain or loss from the sale is a personal gain or loss of the retiring partner.
Note: Same illustrative problem as above:
Dong sold his interest to Dhong Dhong for P 50,000
2017
June 15 Dong, Capital 32,000
Dhong Dhong, Capital 32,000
To record the sale of interest to

Dhong Dhong
The gain of P 18,000 is a personal gain of Dong since the sale of the interest to an outsider is
a personal transaction between the buying partner and Dong.
DEATH, INSOLVENCY OR INCAPACITY OF A PARTNER
ARTICLE 1831: On application by or for a partner, the court shall decree Dissolution whenever:

Bacolor, Pampanga
1.) A partner has been declared insane in any judicial proceeding or is shown to be of unsound
mind
2.) A partner becomes in any other way incapable of performing his part of the partnership contract
3.) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the
business.
4.) A partner wilfully or persistently commits a breach of the partnership agreement.
5.) The partnership of the partnership can only be carried on at a loss
ADMISSION BY INVESTMENT
A person may be admitted into a partnership by investing cash or other assets in the business. The assets
are invested into the partnership and not given to the individual partners.
Definition of terms:
Total Contributed Capital- it is the sum of the capital balances of the old partners and the actual
investment of the new partner
Total Agreed Capital- it is the total capital of the partnership after considering the capital credits given to
each of the partners. Under the bonus method, total agreed capital is equal to the total contributed
capital.
Bonus to Old Partners
Illustration: Alena and Amihan are partners with capital balances of P 400,000 and P 200,000 respectively.
They share profits in the ratio of 3:1. The partners agreed to admit Danaya as a member of the firm.
Case 1: Total Agreed Capital is stated. Assume that Danaya invested P 250,000 for a one fourth interest
in the business. The assets of the partnership and that the total agreed capital is P 850,000.
Contributed Capital Agreed Capital Bonus

(CC)
(AC)
Alena 400,000 428,125 28,125
Amihan 200,000 209,375 9,375
Perena 250,000 212,500 (37,500)
Total 850,000 850,000

Bacolor, Pampanga
Bonus to New Partner
Illustration: Alena and Amihan are partners with capital balances of P 400,000 and P 200,000 respectively.
They share profits in the ratio of 3:1. The partners agreed to admit Danaya as a member of the firm.
Case 1: Total Agreed Capital is stated. Assume that Danaya invested P 240,000 for a one third interest
in the business. Total agreed capital is P 840,000.

(CC)
(AC)
Alena 400,000 370,000 (30,000)
Amihan 200,000 190,000 (10,000)
Perena 240,000 280,000 40,000
Total 840,000 840,000
Case 2: Total Agreed Capital is not expressly stated. Assume that Danaya invested P 300,000 for a 50%
interest in the business.

(CC)
(AC)
Alena 400,000 287,500 (112,500)
Amihan 200,000 162,500 (37,500)
Perena 300,000 450,000 150,000
Total 900,000 900,000
PROBLEMS
PROBLEM 1: CHIKEE and CHINEE are partners with capital balances of P 250,000 and P 310,000
respectively on May, 2017. They share profits and losses equally. CHINKEE is a new partner
1: Chinkee will purchase 2/3 interest of Chikee for P 170,000
2. Chinee will leave the partnership and will sell its interest to Chinkee for P 240,000

Bacolor, Pampanga
3. Chinkee will purchase 1/5 interest from Chinee for P 62,000
4. Chinkee will purchase 2/3 interest from both partners for P 400,000
5. Chinkee will purchase 3/ 4 from Chikee for P 200,000, and ¼ from Chinee for P 65,000
Required:
a.) Prepare the Journal entries for the above transactions

b.) Compute for the Personal Gain or Loss for each transactions and determine whom to charge or give
the personal loss or gain respectively.
PROBLEM 2: During the month of April, 2017, EYEY, BEEBEE, and SYSY formed a partnership
with respective capital balances:
EYEY BEEBEE SYSY

March 1 P 319,000 P 215,600 P 253, 350
March 15 (P 27,400) (P 53, 500) (P 63,400)
March 20 P 20,000 P 45,000 P 30,000
March 31 (P 42,570) (P 55,000) (63,800)
After filing all the requirements to become a legal business, they operated during the month of May, 2017
with a Net Income of P 78,340 which is to be distributed in the ratio of 4:2:2.
But few months after the profitable operation, changes did come into the business. BeeBee needed to go
to abroad to pursue her further studies, but she has to make one major decision that is to withdraw from the
partnership and sell it either to a new partner or to the remaining partners… It took 3 days for her to decide
and she finally decided to sell the whole interest to DeeDee for P 150,000, a special friend of her. When
EyEy heard about this sad news, knowing that she and BeeBee were much closed. She also decided to
withdraw from the partnership and sell the interest to SYSY and DeeDee for P 310,000 to be received and
pay by them in equal share.
1. Prepare for the Journal Entry to record the sale of interest of BeeBee to DeeDee
2. Prepare for the Journal Entry to record the sale of interest of EyEy to SySy and DeeDee
JOURNAL ENTRY:

Bacolor, Pampanga
3. Compute for the Personal Gain or loss of BeeBee and DeeDee
4. Compute for the Personal Gain or loss of EyEy to SySy and DeeDee
PROBLEM 3: Partners Yong and Pal have capital account balances of P 30,000 and P 20,000
respectively and they share profits and losses in a 3:1 ratio.
1. Christine invested P 30,000 for a ¼ interest in the firm, the total partnership capital after
the admission will be P 80,000.
2. Christine invested P 30,000, of which 10,000 is a bonus to Yong and Pal.
“As long as you have God, you’re always bigger than your problems, better than your past
and stronger than your pain”
“IN LIFE, YOU CAN BUY ANYTHING BUT NOT LOVE, YOU CAN FAKE YOUR SMILE BUT NOT
YOUR HAPPINESS. YOU CAN LIE TO OTHERS BUT NOT TO YOURSELF, AND YOU CAN ALWAYS
CHANGE YOUR MIND, BUT NEVER YOUR HEART.
ACCTG 2.5.1- PARTNERSHIP LIQUIDATION

Bacolor, Pampanga
A Partnership is liquidated when its business operations are completely terminated or ended. The
partnership assets are sold, the partnership creditors are paid, and the remaining assets, if any are
distributed to the partners as a return of their investments.
Partnership dissolution with liquidation may be caused by any of the following factors:
1. The accomplishment of the purpose for which the partnership was organized
2. The termination of the term/ period covered by the partnership contract
3. The bankruptcy of the firm
4. The mutual agreement among the partners to close the business.
Marshalling of assets involves the order of creditor’s rights against the partnership’s assets and the
personal assets of the individual partners. The order in which claims against the partnership’s assets will
be marshalled is as follows:
1. Partnership creditors other than partners
2. Partner’s claims other than capital and profits such as loans payable and accrued interest payable
3. Partners claim to capital or profits, to the extent of credit balances in capital accounts.
Right of offset involves a deficit in a partner’s capital (debit balance in the capital account of a partner)
against the loan payable to that partner. The loan payable to a partner has a higher priority in liquidation
than a partner’s capital balance but a lower priority than liabilities to outside creditors.
LUMP- SUM LIQUIDATION or LIQUIDATION BY TOTALS
This is a process whereby the distribution of cash to the partners is done only after all the non cash assets
have been realized. The total amount of gain or loss on realization is known, and all liabilities have been
paid.
PROCEDURES IN LUMP SUM LIQUIDATION
1. Sale of non cash assets and distribution or allocation of gain or loss
2. Distribution of Cash to creditors and partners
STATEMENT OF LIQUIDATION
The Statement of Liquidation is a statement prepared to summarize the liquidation process. It is the basis
of the journal entries made to record liquidation. This statement presents in working paper form the effect
of the liquidation o the Statement of Financial Position. It shows the conversion of assets into cash, the
allocation of gain or loss on realization, and the distribution of cash to creditors and partners.
FRANCE, HAITI AND COLOMBIA

Bacolor, Pampanga
DECEMBER 1, 2017
Assets Liabilities and Partner’s Equity
Cash P 46,000 Liabilities P 52,000
Other Assets 182,000 France, Loan 3,500
Haiti, Loan 2,800
France, Capital 85,900
Haiti, Capital 45,600
Colombia, Capital 38,200
TOTAL ASSETS P228, 000 TOTAL LIABILITIES AND PARTNER’S EQ.P 228,000
Case 1: The other assets were sold for P 215,000
Case 2: The other assets were sold for 148,000
Profit and Loss Ratio is 30%, 40%, 30%
EXERCISE 1:
AKO, SIYA O IKAW
OCTOBER 31, 2017
Assets Liabilities and Partner’s Equity
Cash P 74,000 Liabilities P 125,000
Other Assets 360,000 Siya, Loan 13, 900
Ako, Capital 116, 800
Siya, Capital 81,900
Ikaw, Capital 96,400
TOTAL ASSETS P434, 000 TOTAL LIABILITIES AND PARTNER’S EQ.P 434,000

Bacolor, Pampanga
Profit and Loss Ratio is 20%, 30%, 50%
Required:
a.) Prepare Statement of Liquidations
b.) Prepare Journal Entries
EXERCISE 2:
The following are the balances of CEE-TREE ENTERPRISE for the beginning of the month March 2017
Advertising Expense P 66, 858

Rent Expense 15,717
Other Payables 886,690
Cash 6,362, 520
Chika Capital, Beginning 868,900
Service Income 845,000
Accounts Payable 532,665
Notes Payable 225,645
Salaries Expense 85,412
Other Assets 2,835,000
Supplies Expense 12,225
Chiko, Loan 810,300
Chiki, Loan 750,400
Chiki, Capital Beginning 1,945,300
Chiko, Capital, Beginning 2,512,832
Additional Information:
1. Chika invested P 1,087,480 on March 14, 2017.

2. Liabilities includes Accounts Payable, Notes Payable and Other Payables
3. Chika has a personal cash of P 1,250,700
4. Chiko has a personal cash of P 1,632,900
5. Other assets will be sold for P 1,750,500
6. Profit and Loss Ratio will be 2:3:5
REQUIRED:

Bacolor, Pampanga
1. Prepare a Statement of Financial Position as of March 31, 2017 using the following items (Cash,
Other Assets, Liabilities, Chiki, Loan, Chiko, Loan, Chiki, Capital, Chiko, Capital and
Chika, Capital)
2. Prepare a Statement of Liquidation for the month ended March 31, 2017
3. Prepare Journal Entries
LOOK FOR SOMETHING POSITIVE IN EACH DAY, EVEN IF SOME DAYS YOU HAVE TO LOOK A
LITTLE HARDER. LET THE CHALLENGES MAKES YOU STRONG.”
ACCTG 2.6- ORGANIZATION AND FORMATION OF A CORPORATION

Bacolor, Pampanga
According to Section 1 of the Corporation Code of the Philippines
Corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes and properties expressly authorized by law or incident to its existence
CHARACTERISTICS OF A CORPORATION
1. Separate Legal Entity- Artificial Being- A Corporation is an artificial being with a personality that is
separate from that of its individual owners. Thus, it may, under its corporate name, take, hold, or convey
property to the extent allowed by law, enter into contracts and sue or be sued.
2. Created by operation of law- A Corporation is generally created by operation of law. The mere
agreement of the parties cannot give rise to a corporation.
3. Right of Succession- A Corporation has the right of succession, irrespective with the causes of
dissolution; a corporation can continue its existence up to the period of time stated in the articles of
incorporation but not to exceed fifty years.
4. Power, attributes, properties authorized by law- Being a mere creation of law, a corporation can only
exercise powers provided by law and those powers which are incidental to its existence.
5. Ownership divided into shares- Shareholders have their respective shares in a corporation.
6. Board of Directors- Board of Directors elected by the shareholders. The board of directors is the
governing body or decision making body of the corporation. The Corporation Law provides that the number
of directors be not less than five but not more than fifteen.
ADVANTAGES OF A CORPORATION
1. Greater amount of capital- it is easy for a corporation to raise and assemble capital from the combined
investments of many shareholders.
2. Limited Liability- Creditors of a corporation have a claim against the assets of the corporation but not
against the personal property of its owners. A shareholder never loses beyond the amount of his investment.
3. Transferability of shares of stock- A shareholder can transfer and dispose shares of stock at will without
the consent of other shareholders or of the corporation itself.
4. Continous Existence- the life of a corporation can be extended.
5. Legal Unit- The Corporation has a legal capacity to act as a legal unit.
6. Centralized Management- The management of a corporation is centralized in the board of directors.
7. Standard Creation- Creation, organization, management and dissolution of corporations are governed
under one general incorporation law.
TYPES OF A CORPORATION

Bacolor, Pampanga
1. Public Corporations- Those formed for political or governmental purposes such as municipalities and
cities.
2. Private Corporations- A corporation that is organized for private purposes ( e.g Coca-Cola, San Miguel
Corporation.
3. Stock Corporations- A corporation in which the capital is divided into shares of stock and is authorized
to distribute corporate earnings to holders on the basis of shares held. The owners of stock corporations are
called shareholders.
4. Non- Stock Corporations- A corporation in which capital comes from fees paid by individuals
composing it. The owners of a non- stock corporation are called members.
5. Quasi- Public Corporations- Those engaged in rendering public services such as bus, electric, water,
and telephone companies.
6. Government owned or Controlled Corporations- those which are organized by the government or
those in which the government is a majority stockholder.
7. Domestic Corporations- Those corporations incorporated under Philippine Laws
8. Foreign Corporations- Those corporations formed, organized or existing under any laws other than
those of the Philippines.
9. Ecclesiastical Corporation- Is one which is organized for religious purposes.
10. Eleemosynary Corporation- is one established for charitable purposes.
11. Open Corporation- Corporation whose ownership is widely held by many investors, usually a private
stock corporation.
12. Close Corporation or Family Corporation- Is one, which is limited to selected individuals or
members of the family.
COMPONENTS OF A CORPORATION
1. Incorporators- They are the persons who originally formed the corporation and whose names appear in
the Articles of Incorporation.
2. Corporators- They are the persons who compose the corporation whether as shareholders or members.
3. Shareholders- they are the corporators of a stock corporation.
4. Members- They are the corporators of a non-stock corporation
ORGANIZING A CORPORATION
The process of organizing a corporation generally consists of three stages:

Bacolor, Pampanga
1. Promotion- Includes the selection of a place where in the business is to be legally located, determination
of capital structure, choosing the methods of raising funds, drafting the constitution and bylaws etc.
2. Incorporation- The process of formalizing the organization of the corporation. This stage includes:
a.) Drafting of the articles of incorporation which must be duly executed and acknowledged before a notary
public.
b.) Filing of the articles of incorporation with the Securities and Exchange Commission (SEC) together
with the statement showing that at least 25% of the total authorized share capital (also known as authorized
capital stock) has been subscribed and that at least 25% of the total subscriptions have been paid.
c.) After the required fees have been paid and upon approval of the articles of incorporation, the SEC issues
a certificate of incorporation, the date of which being considered as the date of registration or incorporation.
3. Commencement of the business- The business should start its operations within two years from the date
of incorporation. Failure to do so will automatically dissolve the corporation without the need for a hearing.
ARTICLES OF INCORPORATION
The Articles of incorporation contains the rights and restrictions conferred by the government upon the
corporation. The following information is usually included in the articles of incorporation.
1. The name of the corporation The Articles of incorporation contains the rights and restrictions conferred
2. by the government upon the corporation. The following information is usually included in the articles of
incorporation.
3. The place of the principal of the corporation
4. The term of existence of the corporation not exceeding fifty years
5. The names, nationalities, and addresses of the incorporators;
6. The names of the directors who will serve until their successors are duly elected and qualified in
accordance with the by laws
7. The authorized share capital (authorized capital stock), the classes of share capital (stocks) to be issued
and the number of shares in terms of each class indicating the par value per share , if there is any.
8. The amount of subscriptions to the share capital (capital stock), the names of the subscribers and the
number of shares subscribed by each
9. The total amount paid on the subscriptions to the share capital (capital stock) and the amount paid by
each subscriber on his subscription.
BY- LAWS
The Corporate by Laws normally include the following:

Bacolor, Pampanga
1. The date, place and manner of calling the annual shareholders meeting
2. The manner of conducting meetings.
3. The circumstances which may permit the calling of special meetings of the shareholders
4. The manner of voting and the use of proxies
5. The manner of electing the directors and the number of directors
6. The term of office of the directors
7. The authority and duties of the directors
8. The manner of selecting the corporate officers
9. The authority and responsibilities of the officers
10. The procedure for amending the articles of incorporation
11. The procedure for amending the by laws
REFERENCES:
Baysa Gloria & Lupisan Ma. Concepcion. (2014). Accounting for Partnership and Corporation.
Manila, Philippines: Millenium Books, Inc,
Harina, Ricardo M.. (2011). College Accounting 2. Mandaluyong City: National Book Store
Macapilit, Cecilia. (2011). Partnership & Corporation Accounting and their legal bases. Manila,
Philippines: Rex Book Store Inc.
“THE MOST USEFUL ASSET OF A PERSON IS NOT A HEAD FULL OF KNOWLEDGE BUT A HEART
FULL OF LOVE, WITH EARS OPEN TO LISTEN, AND HANDS WILLING TO HELP.
ACCTG 2.7- ORGANIZATION AND FORMATION OF A CORPORATION

(Part 2)
CLASSES OF SHARES IN GENERAL
1. Par Value Shares- on in which a specific amount is fixed in the articles on incorporation and appearing
on the certificates of stock

Bacolor, Pampanga
2. No Par Value Shares- one without any value appearing on the face of the certificate of stock. A no par
value share may have a stated value which may be fixed in the articles of incorporation
3. The Minimum Stated Value of a no par value is five pesos (P 5.00) per share
4. Voting Shares- Those issued with the right to vote
5. Non- Voting Shares- Those issued without the right to vote
6. Ordinary Shares- these shares entitle the holder to an equal pro rata division of profits without any
preference
7. Preference Shares- these shares entitle the holder to certain advantages or benefits over the holders of
ordinary shares
8. Treasury Shares- a stock has been issued by the corporation as fully paid and later reacquired but not
retired.
MINIMUM SUBSCRIPTION AND PAID IN CAPITAL
At the time of incorporation at least twenty five (25%) percent of the authorized capital stock ( share capital)
as stated in the articles of incorporation must be subscribed and at least 25% of the total subscription must
be paid upon subscription.
In no case, shall the paid in capital be less than five thousand pesos (P 5,000).
These requirements are mandatory. The Securities and Exchange Commission shall not accept the articles
of incorporation of any stock corporation unless accompanied by a sworn statement of the Treasurer elected
by the subscribers showing that the minimum subscription and paid in capital requirements have been
complied with.
BASIC CORPORATE ORGANIZATIONAL STRUCTURE
The Ultimate control of the corporation rests with the Shareholders. They are the owners of the
Corporation. The shareholders elect the top governing body of the corporation, the members of the board
of directors. The Board of Directors is responsible for the formulation of the overall policies of the
corporation and for the exercise of corporate powers. The board also elects a Chairman of the Board
The election of the professional management team or the administrative officers is entrusted to the board.
This team nay include the President, Executive Vice- President, Vice Presidents in charge of Sales,
Manufacturing, Accounting, Finance, Administration and other key areas; Secretary, Treasurer,
Controller. These officers implement the policies of the board of directors and actively manage the day to
day affairs of the corporation.

Bacolor, Pampanga
Annually, a corporation holds the shareholder’s meeting during which the shareholders elect their directors
and make other decisions.
Section 25 of the Corporation Code of the Philippines, states that the President of a Corporation must be a
director of the Corporation, but he cannot act as a President and Secretary or as a President and Treasurer
at the same time.
The Corporate Secretary must be a resident and a citizen of the Philippines. He need not be a Director
unless required by he Corporate by Laws.
The Corporate Treasurer is the proper officer entrusted with the authority to receive and keep the money
of the corporation and to disburse them as may be authorized.
SHAREHOLDER’S EQUITY
The following is the shareholder’s equity section of a Statement of Financial Position
Shareholder’s Equity
Share Capital
Preference Shares- P 50 par, 1,000 authorized, issued and outstanding P 50,000
Ordinary Shares-P 5 par, 30,000 shares authorized, 20,000 shares issued and
Outstanding 100,000
Share Premium- Ordinary 50,000
Retained Earnings 80,000
TOTAL SHAREHOLDER’S EQUITY P 280,000
REFERENCES:
Baysa Gloria & Lupisan Ma. Concepcion. (2015). Accounting for Partnership and Corporation.
Manila, Philippines: Millenium Books, Inc

Accounting 2 (PACOAC) 2016-2017

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DON HONORIO VENTURA TECHNOLOGICAL STATE UNIVERSITY

COLLEGE OF BUSINESS STUDIES

ACCTG 2.1- PARTNERSHIP

2. Mutual Contribution- There cannot be a Partnership without contribution of money, property or

ADVANTAGES & DISADVANTAGES OF A PARTNERSHIP

More Capital Available Risk of dissolution

Better Management Possibility of Disagreement

More interests in the business Unlimited liability of partners

Simple organization Limited in size

Low taxes General agency

ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 1

A Partnership has access to greater or better

The contract of partnership is:

ESSENTIAL REQUISITES OF A PARTNERSHIP

1. There must be a valid contract

3. There must be a mutual contribution of money, property or industry to a common fund

4. The object must be lawful

THE FOLLOWING CANNOT GIVE THEIR CONSENT TO A CONTRACT OF PARTNERSHIP

EFFECTS OF AN UNLAWFUL PARTNERSHIP

ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 2

1. Partnership with a fixed term or for a particular undertaking.

1. Commercial or Trading Partnership- one formed for the transaction of business.

2. Professional or Non- Trading Partnership- one formed for the exercise of

E. According to Legality of Existence

ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 3

ACCTG 2.2.1- PARTNERSHIP FORMATION

ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 4

PARTNER’S LOAN TO THE PARTNERSHIP

PARTNER’S RECEIVABLE ACCOUNT

ILLSUTRATIVE PARTNERSHIP TRANSACTIONS

1. Cash Contributions ONLY by the partners.

Date Particulars F Debit Credit

November 1 Cash P 124,550

Leonora, Capital P 45,600

Teresa, Capital 78,950

Cash investments made by

2. Cash and Non-Cash Contributions by the partners:

ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 5

Date Particulars F Debit Credit

December 1 Cash P 26,325

Furniture & Fixtures 19,300

Tama, Capital P 36,500

Gutchi, Capital 9,125

Various investments made

3. Cash contributions by one partner and services to be contributed by one partner

Date Particulars F Debit Credit

October 1 Cash P 20,000

Tamara, Capital P 20,000

ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 6

Admitted Remata as a partner for a 10% share in the income

4. Non-Cash Assets Contributions by the partner with outstanding balance to be assumed by

On September 1, Bugsy invested equipment valued at P 580,000 with an outstanding balance of P

Date Particulars F Debit Credit

September 1 Equipment P 580,000

Accounts Payable P 174,000

Bugsy, Capital 406,000

5. A Sole Proprietor and an Individual form a Partnership

ACCOUNTING 2- PARTNERSHIP AND CORPORATION ACCOUNTING 7

CHARI ATUTO REPAIR SERVICES

STATEMENT OF FINANCIAL POSITION

AUGUST 31, 2016

Cash P 280, 450

Total Current Assets P 355,191