Unit 2 (Part 4-5): Partnership (Dissolution & Liquidation)

Dissolution

change in the relation of the partners

Dissolution

partnership is not terminated but continues until winding up of partnership affairs is completed

Dissolution

old partnership is dissolved and often a new partnership is created

Dissolution

caused by admission/investment of new partner/s

Dissolution

caused by the termination of the definite term

Dissolution

caused by the express will of any partner

Dissolution

caused by the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debt

Dissolution

caused by the contravention of the agreement between the partners

Dissolution

caused by any event which makes it unlawful for the business of the partnership to be carried on

Dissolution

caused when a specific thing, which a partner had promised to contribute to the partnership, perishes before the delivery

Dissolution

caused by the death of any partner

Dissolution

caused by the insolvency of any partner or of the partnership

Dissolution

caused by the civil interdiction of any partner

Dissolution

caused by decree of court under the following article

Admission by Purchase

does not affect the partnership assets

Admission by Purchase

no gain or loss is recognized in partnership books

Admission by Investment

will increase the partnership assets, as well as the total partnership equity

Asset revaluation

Occurs when Total Agreed Capital is not equal to Total Contributed Capital

Bonus

Occurs when Total Agreed Capital is equal to Total Contributed Capital

1. Liabilities

2. Loans from partners

3. Capital

4. Profits

(4) Order of payment

1. Separate creditors

2. Partnership creditors

3. Partners

(3) Order of claims against an insolvent partner’s property

Liquidation

winding up of the partnership that leads to termination of the business

Lump-sum distrbution

Liquidation by totals

Instalment

Piecemeal

Statement of Partnership Liquidation

statement prepared to document and summarize liquidation proceedings

Liquidation expenses

shared by the partners based on the P&L sharing ratio

Right of offset

when a partner who has a debit capital balance also has made loans to partnership

Capital infusion

required for all solvent general partners when a partner’s capital shows a negative balance [deficit]

Absorption of deficiency

When a partner’s capital shows a negative balance [deficit] and the general partner is insolvent, such deficient balance/s shall be borne by the solvent general partner/s (based on P&L ratio)

Insolvent

Liabilities > Assets

Realization

conversion of non-cash assets to cash

Limited partner

type of partner that does not pay deficiencies

consent of all partners

necessary when a partnership decides to admit a new partner