Session:15 Partnership Accounting
Key Terms
Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting
- bonus
- difference between the value of a partner’s capital account and the cash payment made at the time of that partner’s or another partner’s withdrawal
- capital account
- equity account for each partner that tracks all activities such as profit sharing, reductions due to distributions, and contributions by partners to partnership
- dissolution
- closing down of a partnership for economic, personal, or other reasons that may be unique to the particular partnership
- general partnership
- partnership in which each partner is personally liable to the partnership’s creditors if the partnership has insufficient assets to pay its creditors
- limited liability
- form of legal liability in which a partner’s obligation to creditors is limited to his or her capital contributions to the firm
- limited liability partnership (LLP)
- partnership that provides all partners with limited personal liability against all other partners’ obligations
- limited partnership (LP)
- partnership in which at least one partner is a general partner but the remaining partners can be limited partners, which means they are liable only for their own investment in the firm if the partnership cannot pay its creditors; thus, their personal assets are not at risk
- liquidation
- (also, dissolution) process of selling off non-cash assets
- mutual agency
- ability of each partner to act as an agent of the partnership in dealing with persons outside the partnership
- partner
- individuals, corporations, and even other partnerships participating in a partnership entity
- partnership
- legal business structure consisting of an association of two or more people who contribute money, property, or services to operate as co-owners of a business
- partnership agreement
- document that details the partners’ role, the way profits and loss are shared, and the contributions each partner makes to the partnership
- realization
- the sale of noncash assets for cash
- unlimited liability
- form of legal liability in which general partners are liable for all business debts if the business cannot meet its liabilities