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Accountants' Handbook, Volume One, Financial Accounting and General Topics, 12th Edition by Lynford Graham, D. R. Carmichael

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Chapter 20

Partnerships and Joint Ventures

The editors wish to acknowledge the previous contribution to this chapter by George N. Dietz, CPA, American Institute of Certified Public Accountants; Gerard L. Yarnall, CPA, Deloitte & Touche; and Ronald J. Patten, PhD, CPA, DePaul University.

Francis E. Scheuerell Jr., CPA

Navigant Consulting

20.1 Nature and Organization of The Partnership Entity

(a) Definition of Partnership

(b) Advantages and Disadvantages of a Partnership

(c) Tax Considerations

(d) Importance of the Partnership

(e) Formation of a Partnership

(f) Initial Balance Sheet

20.2 Accounting for Partnership Operations

(a) Peculiarities of Partnership Accounting

(b) Methods of Dividing Profits and Losses

(c) Example Using Average Capital Ratio

(d) Treatment of Transactions Between Partner and Firm

(i) Interest on Invested Capital

(ii) Partners' Salaries

(iii) Bonuses

(iv) Debtor–Creditor Relationship

(v) Landlord–Tenant Relationship

(vi) Statement Presentation

(e) Closing Operating Accounts

(i) Division of Profits Illustrated

(ii) Statement of Partners' Capitals Illustrated

(f) Income Taxes

20.3 Accounting for Changes in Firm Membership

(a) Effect of Change in Partners

(b) New Partner Purchasing an Interest

(i) Purchase at Book Value

(ii) Purchase at More than Book Value

(iii) Purchase at Less than Book Value

(c) New Partner's Investment to Acquire an Interest

(i) Investment at Book Value

(ii) Investment at More than Book Value

(iii) Investment at Less Than Book Value

(iv) ...

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