PARCOR Prelims

CHAPTER 1
General Professional Partnership – these are the partnership that exercises their profession.
When we say Mutual Contribution, there must be contribution of money, property and service.
They must share in profit and losses.
One contribution means ownership of co-partners in a special way.
Mutual agency – a partner is acting as an agent.
Any partner can bind if he is acting within his express or implied authority.
Partnership has limited life.
Partnership has unlimited liability.
Income tax – 30%
The GPP are exempted from Income tax of 30%.
Advantage: greater financial capability
Advantage: combination of skills
Advantage: offers freedom and flexibility in decision making
Advantage: less expensive to organize
Advantage: personal and informal
Disadvantage: easily dissolve
Disadvantage: "Mutual Agency" and "Unlimited Liability" may create personal obligations to the partner
Disadvantage: Less effective than corporation to raise capital
Partnership is created by mere agreement of partners
Two or more persons may form a partnership
Commencement of Juridical Personality: execution of articles of partnership
Every partner is agent of partnership.
General partners are liable to the extent of his personal assets.
There is no right of succession in the partnership.
The time of existence of the partnership is stipulated by partners.
Universal Partnership of all Present Property – all contributions
Universal Partnership of all Profits – all gains of partners is a contribution to the partnership.
If there is no statement what kind of universal partnership , it is Universal Partnership of all Profits
Particular Partnership – it is determinate
General Partnership – all partners are liable to the extent of their properties. All partners are general partners.
Limited Partnership – the law states that in this kind of partnership, there must be at least 1 general partner.
De jure partnership – has complied all legal requirements.
De facto partnership – failed to complied all legal requirements.
General Partner – liable to the extent of his personal property
Limited Partner – liable only to the extent of his capital contribution
Capitalist Partner – who contributes money or property
Industrial Partner – who contributes his knowledge or skills
Managing Partner – who appointed as manager
Liquidating Partner – who is designated to wind up or settle the affairs of the partnership after dissolution
Dormant Partner – not active; not known
Silent Partner – not active; known
Secret Partner – active; known
Nominal Partner – partner by estoppel who represent himself as a partner but not actually a partner
Partnership can be constituted through orally or written
Agreements are embodied in the Article of Partnership
There must be written or public instrument when a partner contributes property
Partnership is void when the public instruments is not made
When the partnership has P3000 or more, it must be recorded in SEC
Failure of registration of partnership with capital of more than P3000 is still valid
CPA's can only form a partnership not a corporation
Professional Regulation Commission
The registration must be renewed every 3 years
Drawing Account: Debit – Temporary withdrawals
Capital Account: Debit – Permanent withdrawals
Non-cash asset investment – must be recorded based on agreed price
If there is an absence of any agreement, it must be recorded at fair market value.
Always record at their fair market value.
Capital account will replace the nominal account in adjusting entry when there is a formation of the partnership.
The investment of non-cash asset with liability attached into it must be also included in his/her investment.
Memorandum entry must be made if there is an admission of industrial partner. It is recorded in general journal.
New Statement of Financial Position: the contra-accounts of non-cash assets must not be included, thus, the properties involved are recorded at the book value.
Monthly withdrawal & Salary: Drawing account
New book will be used in partnership.
If the book of a partner with existing business, it is no longer need to be closed.
Carrying amount is a book value.
The "Allowance for Uncollectible Accounts" must be included for its possibility of collection in the future. It must be written-off, unless, otherwise, stated in the agreement.
Any change in the relationship of the partnership will dissolve the partnership.
Partnership may not be established for charity.




Prepared by: DJP