Fist time setting up a partnership...I need help!

Ok I am having some difficulty when setting up my company when it comes to partners investments,  due to shareholder, etc.  What accounts are needed and which ones are debited and credited. I have never worked with a partnership before and I am so confused

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  • 0

    Hi Sandra 519,

    This article from the following site may help you. 

    "Equity Accounts – Partnerships

    Partnerships do not use retained earnings, dividend or stockholders’ equity accounts as a partnership does not pay dividends or have stockholders. Instead, each partner has two equity accounts, one to record capital and the other to record withdrawals. The capital account tracks the partner’s contributions to the firm, with the offset to the appropriate asset. For example, if a partner contributes cash, the offset would be to cash, but if he contributes the company’s delivery vans, the offset would be vehicles. Noncash contributions are booked at fair market value. Contributions may occur at start-up or at any time during the life of the partnership. The withdrawal accounts record the distributions each partner receives. The method of distribution depends on the terms of the partnership agreement. As an example, if the agreement states that each partner receives a $1,000 draw per month with the balance paid at year-end, there are three equal partners, and the business earns an annual profit of $144,000, each partner would receive $36,000 at year-end. This $36,000, plus the $12,000 paid monthly throughout the year, would be recorded to each partner’s withdrawal account. If the partner’s investment plus earnings are greater than withdrawals, the capital account increases."
    (http://smallbusiness.chron.com/accounting-difference-partnership-corporation-66325.html)

    Hope this helps.

Reply
  • 0

    Hi Sandra 519,

    This article from the following site may help you. 

    "Equity Accounts – Partnerships

    Partnerships do not use retained earnings, dividend or stockholders’ equity accounts as a partnership does not pay dividends or have stockholders. Instead, each partner has two equity accounts, one to record capital and the other to record withdrawals. The capital account tracks the partner’s contributions to the firm, with the offset to the appropriate asset. For example, if a partner contributes cash, the offset would be to cash, but if he contributes the company’s delivery vans, the offset would be vehicles. Noncash contributions are booked at fair market value. Contributions may occur at start-up or at any time during the life of the partnership. The withdrawal accounts record the distributions each partner receives. The method of distribution depends on the terms of the partnership agreement. As an example, if the agreement states that each partner receives a $1,000 draw per month with the balance paid at year-end, there are three equal partners, and the business earns an annual profit of $144,000, each partner would receive $36,000 at year-end. This $36,000, plus the $12,000 paid monthly throughout the year, would be recorded to each partner’s withdrawal account. If the partner’s investment plus earnings are greater than withdrawals, the capital account increases."
    (http://smallbusiness.chron.com/accounting-difference-partnership-corporation-66325.html)

    Hope this helps.

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