Accounting procedure based on the
legal perspective.
In this chapter, we apply an accounting procedure to record changes in partnership
ownership, such as admission, retirement, or death of a partner. Examples 3.10 to
3.12 illustrate this from the legal perspective.
Here's how we make accounting entries in the books of the
existing partnership:
Step 1: Close off the books:
Typically done on the last date of the partnership's existence, regarded as the date
of dissolution. This involves:
• Making any necessary financial adjustments, like depreciation or accrued
expenses.
• Closing nominal accounts for income and expenses, as well as drawings
accounts for partner withdrawals.
• After this step, only accounts relevant to the statement of financial position
remain in the partnership's ledger.
We often skip this step-in example for simplicity, but it's crucial for proper
accounting practice.
legal perspective.
In this chapter, we apply an accounting procedure to record changes in partnership
ownership, such as admission, retirement, or death of a partner. Examples 3.10 to
3.12 illustrate this from the legal perspective.
Here's how we make accounting entries in the books of the
existing partnership:
Step 1: Close off the books:
Typically done on the last date of the partnership's existence, regarded as the date
of dissolution. This involves:
• Making any necessary financial adjustments, like depreciation or accrued
expenses.
• Closing nominal accounts for income and expenses, as well as drawings
accounts for partner withdrawals.
• After this step, only accounts relevant to the statement of financial position
remain in the partnership's ledger.
We often skip this step-in example for simplicity, but it's crucial for proper
accounting practice.
