Accounting by Partnerships (Portfolio 5209)

BNA Tax and Accounting Portfolio 5209-2nd, Accounting by Partnerships (Accounting Policy and Practice Series), explains the accounting for all phases in the typical life cycle of a non-public partnership entity and briefly discusses other significant events, including the incorporation and consolidation of partnerships.

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Description

BNA Tax and Accounting Portfolio 5209-2nd, Accounting by Partnerships (Accounting Policy and Practice Series), explains the accounting for all phases in the typical life cycle of a non-public partnership entity and briefly discusses other significant events, including the incorporation and consolidation of partnerships. Although existing Generally Accepted Accounting Principles (GAAP) apply only to partnerships that are publicly traded and registered investment partnerships, many partnerships, both general and limited, choose to maintain records and accounts in accordance with GAAP. This Portfolio focuses on those partnerships that are not publicly traded but do maintain accounts in accordance with GAAP. Publicly traded partnerships employing GAAP may find this Portfolio's explanations and analysis useful. However, this Portfolio does not comprehensively explore GAAP with which publicly traded partnerships must comply.
There are no definitive accounting pronouncements specifically related to accounting by partnerships. Accounting by non-public partnerships that choose to apply GAAP is centered upon the maintenance of capital accounts. This Portfolio provides detailed examples and comments relating to the effect of partnership transactions on partners' capital accounts. The accounting for partnership formation, operations, distributions, changes in partnership, and liquidation are covered in detail. Incorporation of a partnership is also briefly discussed.
This Portfolio may be cited as BNA Tax and Accounting Portfolio 5209-2nd, Pandit and Rubenfield, Accounting by Partnerships (Accounting Policy and Practice Series).

Authors

Ganesh M. Pandit, CPA

Ganesh M. Pandit, CPA, CMA, DBA, Louisiana Tech University; MBA, University of Louisiana at Monroe. Mr. Pandit has a Post Graduate Diploma in Systems Management and a Bachelor of Commerce from the University of Bombay. He has previous experience in both public accounting at a chartered accounting firm and in industry. With more than 15 years of experience in teaching financial and managerial accounting at both undergraduate and graduate levels, Mr. Pandit currently is a faculty member at Adelphi University in Long Island, NY. He has authored and co-authored several articles on accounting and related topics that have appeared in both academic and practitioner journals. These articles include: “Auditor Compensation Pattern of S&P 500 Corporations Before and After the Passage of Sarbanes-Oxley Act” in the Journal of Applied Business Research, Summer 2007; “Are the Audit Committee Reports Disclosing Enough after the Sarbanes-Oxley Act? A study of NYSE Companies” in the Managerial Auditing Journal, Vol. 21, No. 1 (2006) [selected as a Highly Commended Paper at the Emerald Literati Network Awards for Excellence 2007]; and “Audit Committee Reports Before and After the Sarbanes-Oxley Act: A Study of Companies Listed on the NYSE” in The CPA Journal, October 2005 [solicited for a proposed book on Audit Committees by the ICFAI University, an academic institution in India]. Mr. Pandit is a non-practicing C.P.A. from Louisiana.

Allen J. Rubenfield, J.D., CPA

Allen J. Rubenfield, CPA, J.D., University of Pittsburgh; M.B.A., University of Pittsburgh; B.A., Pennsylvania State University. Allen Rubenfield has authored numerous articles for both practitioner and academic journals, including The CPA Journal, The Journal of Applied Business Research, and the New Accountant. He is currently a Lecturer of Accounting at the Stetson School of Business and Economics at Mercer University in Atlanta, GA. He is a licensed Certified Public Accountant in Maryland and a licensed attorney in both Pennsylvania and the District of Columbia.

Table of Contents

Detailed Analysis

I. Overview and Scope of Portfolio

A. Definition of "Partnership"

1. In General

2. Definition for Federal Income Tax Purposes

3. Limited Liability Companies

4. Limited Liability Partnerships

5. Limited Liability Limited Partnerships

6. Publicly Traded Partnerships

a. In General

b. Federal Income Tax Definition

c. Publicly Traded Master Limited Partnerships

7. Investment Partnerships

B. Application of Uniform Partnership Act

C. Applicability of GAAP

1. Overview

2. Owners' Equity

D. Entity vs. Aggregate Approach to Partnerships

E. Capital Accounts

F. Scope of Portfolio

II. Routine Partnership Transactions

A. Formation of Partnership

1. Contribution of Tangible Assets and Liabilities Upon Partnership Formation

2. Contribution of Intangible Assets Upon Partnership Formation

a. Goodwill Method

b. Bonus Method

B. Partners' Investments of Cash and Non-Monetary Assets During Accounting Year

C. Partners' Periodic Withdrawals of Assets During Accounting Year

D. Loans Between Partnership and Partners

E. Allocation of Partnership Income and Losses

1. In General

2. Allocation of Income and Losses Based on Predetermined Percentages

3. Allocation of Income Based on Interest on Capital Balances

4. Allocation of Partnership Income as Salaries and Bonuses to Partners

5. Combination of Several Allocation Techniques

F. Non-liquidating Distributions to Partners

III. Admission of a New Partner

Introductory Material

A. Book Value/Bonus Approach

B. Revaluation/Goodwill Approach

C. New Partner Purchases Interest From One or More Existing Partners

1. Payment Equal to Book Value of Share in New Partnership

2. Payment Exceeds Book Value of Share in New Partnership - No Revaluation of Partnership Net Assets

3. Payment Exceeds Book Value of Share in New Partnership and Partnership's Net Assets Are Revalued

D. New Partner Contributes Assets to Partnership Capital

1. Contribution Equals Book Value of Share in Partnership Capital

2. Contribution Exceeds Book Value of Share in Partnership - Bonus Method

3. Contribution Exceeds Book Value of Share of Partnership - Partnership Net Assets Are Revalued

4. Contribution Is less Than Share of Partnership - Bonus Method

5. Contribution Is Less Than Share of Partnership - Revaluation Method

6. Contribution Is Less Than Share of Partnership - Partnership Records Goodwill

IV. Withdrawal of an Existing Partner

Introductory Material

A. Withdrawal of Partner - Direct Buyout by Remaining Partners

B. Withdrawal of Partner Who Receives Settlement From Partnership

1. Settlement Amount Equal to Share of Book Value of Partnership's Net Assets

2. Settlement Amount Exceeds Book Value - Bonus Method

3. Settlement Amount Exceeds Book Value - Revaluation

4. Settlement Amount Exceeds Book Value - Goodwill

5. Settlement Amount Less Than Share of Book Value - Bonus Method

6. Settlement Amount Less Than Share of Partnership Capital - Revaluation

C. Death of a Partner

V. Liquidation of a Partnership

A. In General

B. Accounting for the Liquidation of a Partnership

1. Statement of Liquidation

2. Simple Liquidation

(a) Solvent Partnership and All Partners Have Credit Balances

(b) Solvent Partnership - One or More Partners Have Debit Balances

(1) Solvent Partner With Sufficient Assets to Contribute to Debit Balance

(2) Partner With Insufficient Assets to Fully Restore Debit Balance

(3) Insolvent Partner With No Assets to Restore His Debit Balance

(c) Insolvent Partnership

C. Installment Distributions

D. Partner's Loss Absorption Power and Cash Distribution Plan

VI. Incorporation of a Partnership

A. In General

B. Accounting Procedure for Incorporation of a Partnership

VII. Consolidation of Partnerships

A. Overview

B. Application of Financial Accounting Standards Board (FASB) Interpretation of Financial Accounting Standard No. 46 (R)

C. Accounting for Investments in Partnerships Which Are Not Variable Interest Entities

1. Limited Partnership

2. General Partnership

3. Limited Liability Companies

Working Papers

Working Papers

TABLE OF WORKSHEETS

Worksheet 1 Glossary

Bibliography

OFFICIAL:

Securities and Exchange Commission

SEC Regulations

The Internal Revenue Code of 1986, as amended, Title 26 of the U.S. Code

Revenue Rulings

Financial Accounting Standards Board

FASB Statements of Financial Accounting Standards

FASB Concepts Statements

FASB Interpretations

FASB Staff Positions

Emerging Issues Task Force (FASB-EITF Issues)

Accounting Principles Board Opinions

Public Company Accounting Oversight Board

American Institute of Certified Public Accountants

AICPA Statements of Position

Auditing Standards Board

AICPA Audit and Accounting Guides

AICPA Code of Professional Conduct

 

UNOFFICIAL

Uniform Partnership Act of 1914

Revised Uniform Partnership Act (1997)

Model Business Corporation Act (2002)

Accounting Textbooks, Handbooks, Articles, Speeches, and Letters