Accounting transaction for liquidating partnership

Posted by / 12-Dec-2017 05:26

Accounting transaction for liquidating partnership

To illustrate, assume that a partner received 0 as an interest allowance.

The amount is included in the net income/loss distribution entry when the books are closed to the capital accounts at year end: As a result, the above entry Income Summary, which is a temporary equity closing account used for year-end, is reduced by 0, and the capital account is increased by the same amount.

For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income.

It does not matter whether or not a partner withdrew any amount of money from his capital account.

For example, one partner contributed more of the assets, and works full-time in the partnership, while the other partner contributed a smaller amount of assets and does not provide as much services to the partnership.

Compensation for services is provided in the form of salary allowance.

Salary and interest allowances are guaranteed payments, discussed later.

Capital account of a partner is decreased when the owner makes withdrawals of cash or property The partnership agreement may specify that partners should be compensated for services they provide to the partnership and for capital invested by partners.

accounting transaction for liquidating partnership-12accounting transaction for liquidating partnership-20accounting transaction for liquidating partnership-35

The important features of and accounting procedures for partnerships are discussed and illustrated below.