Partnership Corporation Baysa Lupisan Manual2014: Tips and Tricks for Accounting Success
Partnership Corporation Baysa Lupisan Manual2014: A Comprehensive Guide for Accounting Students
If you are an accounting student who wants to learn more about partnership and corporation accounting, you might have come across the term partnership corporation baysa lupisan manual2014. This term refers to a book titled Accounting for Partnership and Corporation by Conrado T. Baysa and Ma. Cecilia L. Lupisan. This book was published in 2014 by Rex Book Store Inc., one of the leading publishers of educational books in the Philippines.
partnership corporation baysa lupisan manual2014
This book is a comprehensive guide that covers the theory and practice of accounting for partnership and corporation. It explains the concepts, principles, methods and procedures of accounting for these two types of business organizations. It also provides examples, illustrations, exercises and solutions to help students understand and apply the accounting concepts.
In this article, we will give you an overview of what this book covers and why it is important for accounting students. We will also compare and contrast partnership and corporation in terms of their definition, characteristics, advantages, disadvantages, formation process and accounting methods. By the end of this article, you should have a better understanding of partnership corporation baysa lupisan manual2014.
What is Partnership?
A partnership is a type of business organization that involves two or more persons who agree to carry on a business as co-owners. The persons who form a partnership are called partners. The partners contribute money, property or services to the business and share its profits and losses.
Some of the characteristics of a partnership are:
It is a voluntary association of two or more persons.
It is based on a contract or agreement among the partners.
It has a limited life, meaning it can be dissolved by the death, withdrawal or bankruptcy of any partner.
It has unlimited liability, meaning the partners are personally liable for the debts and obligations of the business.
It has mutual agency, meaning each partner can act on behalf of the partnership and bind it to contracts and transactions.
Some of the advantages of a partnership are:
It is easy and inexpensive to form and operate.
It can pool the resources, skills and talents of the partners.
It can enjoy tax benefits, such as avoiding double taxation and deducting losses.
It can have more flexibility and control over the business decisions.
Some of the disadvantages of a partnership are:
It has unlimited liability, meaning the partners can lose their personal assets if the business fails.
It has limited life, meaning it can be disrupted by the changes in the partnership.
It has potential conflicts and disagreements among the partners.
It has limited access to capital and credit compared to corporations.
What is Corporation?
A corporation is a type of business organization that is created by law as a separate legal entity. The owners of a corporation are called shareholders or stockholders. The shareholders elect a board of directors who appoint managers to run the business. The shareholders have limited liability, meaning they can only lose their investment in the corporation and not their personal assets.
Some of the characteristics of a corporation are:
It is a legal entity that is separate from its owners.
It is created by law through a charter or articles of incorporation.
It has a perpetual life, meaning it can continue to exist even if the owners change or die.
It has limited liability, meaning the owners are not personally liable for the debts and obligations of the business.
It has no mutual agency, meaning the owners cannot act on behalf of the corporation or bind it to contracts and transactions.
Some of the advantages of a corporation are:
It has limited liability, meaning the owners can protect their personal assets from the business risks.
It has perpetual life, meaning it can have continuity and stability in its operations.
It has easy transferability of ownership, meaning the owners can sell or buy shares without affecting the business.
It has greater access to capital and credit compared to partnerships.
Some of the disadvantages of a corporation are:
It is complex and expensive to form and operate.
It is subject to more regulations and restrictions by the government.
It can suffer from double taxation, meaning it pays taxes on its income and its shareholders pay taxes on their dividends.
It can have conflicts of interest between the owners and the managers.
How to Form a Partnership?
To form a partnership, two or more persons must agree to carry on a business as co-owners. This agreement can be oral or written, but it is advisable to have a written contract that specifies the terms and conditions of the partnership. This contract is called a partnership agreement or articles of partnership. Some of the things that should be included in a partnership agreement are:
The name and address of the partnership and its partners
The nature and purpose of the business
The duration of the partnership
The capital contributions and ownership interests of each partner
The profit and loss sharing ratio among the partners
The rights and duties of each partner
The procedures for admitting new partners or withdrawing existing partners
The procedures for dissolving or liquidating the partnership
In addition to having a partnership agreement, some partnerships may also need to register with the appropriate authorities, such as the Securities and Exchange Commission (SEC), the Bureau of Internal Revenue (BIR), or the local government units (LGUs). This depends on the type, size and location of the partnership. The registration process may involve filing some documents, paying some fees, obtaining some permits or licenses, and complying with some rules and regulations. The registration process may vary from one jurisdiction to another, so it is advisable to consult with a lawyer or an accountant before forming a partnership.
How to Form a Corporation?
To form a corporation, at least two but not more than 15 persons must agree to establish a business as shareholders. This agreement must be written in a document called articles of incorporation, which contains the essential information about the corporation, such as its name, purpose, capital structure, board of directors, and corporate officers. The articles of incorporation must be signed by the incorporators and notarized by a lawyer. In addition to the articles of incorporation, the incorporators must also prepare and submit other documents, such as: - By-laws, which are the internal rules and regulations of the corporation - Treasurer's affidavit, which certifies the amount of capital subscribed and paid by the shareholders - Bank certificate of deposit, which shows the deposit of at least 25% of the subscribed capital in a bank account under the corporation's name - Registration data sheet, which provides basic information about the corporation and its incorporators - Clearance from other government agencies, such as the Department of Trade and Industry (DTI), if the corporation's name is similar to an existing business name - Endorsement from other government agencies, such as the Bangko Sentral ng Pilipinas (BSP), if the corporation is engaged in a regulated industry The incorporators must file these documents with the Securities and Exchange Commission (SEC), which is the government agency that regulates corporations in the Philippines. The SEC will review and approve the documents if they comply with the requirements of the Revised Corporation Code and other relevant laws. The SEC will then issue a certificate of registration, which is the official proof that the corporation is legally created. After obtaining the certificate of registration from the SEC, the corporation must also register with other government agencies, such as: - Bureau of Internal Revenue (BIR), which is the tax authority that issues a tax identification number (TIN) and authorizes official receipts and invoices - Social Security System (SSS), which is the social insurance program that provides benefits to employees and employers - Philippine Health Insurance Corporation (PhilHealth), which is the health insurance program that covers medical expenses of employees and employers - Home Development Mutual Fund (HDMF) or Pag-IBIG Fund, which is the housing loan program that offers affordable financing to employees and employers - Local government units (LGUs), such as barangays, cities or municipalities, and provinces, which issue barangay clearance, business permit or mayor's permit, and community tax certificate or cedula The registration process with these agencies may involve filing some forms, paying some fees, obtaining some certificates or stickers, and complying with some rules and regulations. The registration process may vary from one jurisdiction to another, so it is advisable to consult with a lawyer or an accountant before forming a corporation. How to Account for Partnership?
Accounting for partnership involves recording and reporting the financial transactions and events of a partnership. Accounting for partnership follows generally accepted accounting principles (GAAP), except for some special rules that apply to partnership accounting. Some of these special rules are:
Each partner has a separate capital account that shows his or her ownership interest in the partnership.
Each partner may also have a separate drawing account that shows his or her withdrawals from the partnership.
The partners share the profits and losses of the partnership according to their agreed ratio.
The partners may have different methods of accounting for their capital contributions and profit and loss sharing.
Some of the methods of accounting for partnership are:
Nature and Formation of Partnership
When a partnership is formed, each partner contributes money, property or services to the business. These contributions are recorded in their respective capital accounts at fair market value. The total capital of the partnership is equal to the sum of all partners' capital accounts.
There are two methods of accounting for partners' contributions: cash method and accrual method. Under the cash method, only cash contributions are recorded in the capital accounts. Under the accrual method, both cash and non-cash contributions are recorded in the capital accounts.
Example:
Alice and Bob form a partnership to operate a restaurant. Alice contributes 100,000 in cash and Bob contributes 50,000 in cash and equipment worth 50,000. The journal entries to record their contributions under both methods are:
Cash Method Accrual Method --- --- Cash 150,000 Cash 150,000 Alice, Capital 100,000 Alice, Capital 100,000 Bob, Capital 50,000 Bob, Capital 100,000 Equipment 50,000 The partners also agree to share the profits and losses of the partnership equally. This ratio is recorded in the partnership agreement or articles of partnership. The profit and loss sharing ratio can be based on the partners' capital contributions, services rendered, or any other basis agreed by the partners.
Operations of Partnership
When a partnership operates, it generates revenues and incurs expenses from its business activities. These revenues and expenses are recorded in the income statement of the partnership. The income statement shows the net income or net loss of the partnership for a given period.
The net income or net loss of the partnership is then allocated to the partners according to their profit and loss sharing ratio. The allocation is recorded in their respective capital accounts. The capital accounts show the changes in the partners' ownership interests in the partnership.
The balance sheet of the partnership shows the assets, liabilities and equity of the partnership as of a given date. The equity section consists of the partners' capital accounts and drawing accounts. The drawing accounts show the withdrawals made by the partners from the partnership during the period.
The statement of changes in equity of the partnership shows the beginning and ending balances of the partners' capital accounts and drawing accounts. It also shows the contributions made by the partners, the allocations of net income or net loss, and the distributions made to the partners during the period.
Example:
Alice and Bob operate a restaurant as a partnership. They share the profits and losses equally. The following information is available for the year ended December 31, 2023:
Item Amount --- --- Revenues 500,000 Expenses 300,000 Alice's drawings 20,000 Bob's drawings 30,000 The income statement of the partnership for the year ended December 31, 2023 is:
Revenues
500,000
Less: Expenses
300,000
Net Income
200,000
The allocation of net income to Alice and Bob is:
Alice's share (50%)
100,000
Bob's share (50%)
100,000
Total
200,000
The capital accounts of Alice and Bob as of December 31, 2023 are:
Alice
Bob
Total
Beginning balance
100,000
100,000
200,000
Add: Net income allocation
100,000
100,000
200,000
Less: Drawings
(20,000)
(30,000)
(50,000)
Ending balance
180,000
170,000
350,000
The balance sheet of the partnership as of December 31, 2023 is:
Assets Cash 150,000 Equipment (net) 50,000 Total Assets 200,000 Liabilities Accounts Payable 50,000 Total Liabilities 50,000 Equity Alice's Capital 180,000 Bob's Capital 170,000 Total Equity 350,000 Total Liabilities and Equity 400,000 71b2f0854b