Partner's Capital Account

Debit Credit

Permanent witdrawals Original investment

Debit balance of the drawing Additional investment
"account at the end of the period" Credit balance of the drawing
"account at the end of the period"

Partner's Drawing Account

Debit Credit

Temporary withdrawals Share in profit

Share in loss "can be credited directly to capital"
"can be debited directly to capital"

Owner's Equity Account

Debit Credit

Decrease in asset Increase in asset

Increase in liability Decrease in liability
Increase in contra asset Decrease in contra asset
Illustration: Emerita Geron and Emerita Modesto formed a general professional partnership.
Emerita Geron will invest sufficient cash to get an equal interest in the partnership while Emerita Modesto
will transfer the assets and liabilities of her business. The account balances on the books of Modesto
prior to partnership fomation follows:

Debit
Cash 180,000
A/R 300,000
Office equipment 1,500,000
Accumulated depreciation
Accounts payable
Salaries payable
Emerita Modesto, Capital

It is agreed that for purposes of establishing Emerita Geron's interest, the following adjustments
shall be made in the books of Emerita Modesto:
1. An allowance for uncollectible accounts of 5% of accounts receivable is to be established
2. Prepaid expenses amounting to P30,000, were omitted by the accountant. This is to be recognized
3. Additional salaries payable in the amount of P10,000 is to be established

Emerita Modesto, Capital

15,000 1,200,000 Beg.
10,000 30,000
25,000 1,230,000

1,205,000

Debit
Cash 180,000
A/R 300,000
Office equipment 1,500,000
Allowance for uncollectible accounts
Accumulated depreciation
Accounts payable
Salaries payable
Emerita Modesto, Capital
Prepaid expenses 30,000
2,010,000
while Emerita Modesto
books of Modesto Assets = Liabilities +

(15,000)
Credit 30,000
10,000
15,000 10,000

600,000 15,000 = 15,0

155,000
25,000
1,200,000 Journal Entries

g adjustments 1 Emerita Modesto, Capital

Allowance for Uncollectible accounts
Php 15,000
s to be recognized 2 Prepaid expenses
Emerita Modesto, Capital

3 Emerita Modesto, Capital

Salaries payable

Credit

15,000
600,000
155,000
35,000
1,205,000

2,010,000
Owner's equity

(15,000)
30,000
(10,000)
5,000

15,000

15,000
15,000

30,000
30,000

10,000
10,000
Illustration: On July 1,2018, Nilo Burgos and Rey Fernan Refozar agreed to form a partnership.
The partnership agreement specified that Burgos is to invest cash of P700,000 and
Refozar is to contribute land with a fair market value of P1,300,000 with P300,000 mortgage
to be assumed by the partnership. The entries are as follows:

To record the initial investments of Burgos and Refozar

Cash 700,000
Land 1,300,000
Mortgage payable 300,000
Nilo Burgos, Capital 700,000
Rey Fernan Refozar, Capital 1,000,000

Burgos and Refozar

Statement of Financial Position
July 1 ,2018

Assets
Cash 700,000
Land 1,300,000
Total assets 2,000,000

Liabilities and Owners Equity

Mortgage payable 300,000
Nilo Burgos, Capital 700,000
Rey Fernan Refozar, Capital 1,000,000
Total Liabilities and Owner's Equity 2,000,000
Illustration: The statement of financial position of Leopoldo Medina on Oct. 1, 2018 before accepting
John Karlo Dalangin as partner is shown as follows:

Lepoldo Medina
Statement of Financial Position
Oct. 1, 2018

Assets
Cash 60,000
Notes Receivable 30,000
Accounts Receivable 240,000
Allowance for Uncollectible accounts 10,000 230,000
Merchandise Inventory 80,000
Furniture and Fixtures 60,000
Accumulated Depreciation 6,000 54,000
Total Assets 454,000

Liabilities and Owner's Equity

Notes Payable 40,000
Accounts Payable 100,000
Leopoldo Medina Capital 314,000
Total Liabilities and Owner's Equity 454,000

John Karlo Dalangin offered to invest cash to get a capital credit equal to one-half of Leopoldo Medina's
capital after giving effect to the adjustments below. Del Mundo accepted the offer.
1. The merchandise is to be valued at P74,000
2. The accounts receivable is estimated to be 95% collectible Php 12,000
3. Interest accrued on the Notes Receivable will be recognized P10,000, 1200
12% dated July 1, 2018 and P20,000, 12% dated August 1, 2018 2400
4. Interest on Notes payable to be accrued at 14% annually from April 1,2018 5600
5. The furniture and fixtures are to be valued at P46,000
6. Office supplies on hand taht have been charged to expense in the past amounted to P4,000

Medina and Dalangin

Statement of Financial Position
Oct. 1, 2018
Assets
Cash 209,950
Notes Receivable 30,000
Accounts Receivable 240,000
Allowance for uncollectible accounts 12,000 228,000
Interest Receivable 700
Mercahndise inventory 74,000
Office supplies 4,000
Furniture and Fixtures 46,000
Total Assets 592,650

Liabilities and Owner's Equity

Notes payable 40,000
Accounts payable 100,000
Interest payable 2,800
Leopoldo Medina, Capital 299,900
John Karlo Dalangin, Capital 149,950
Total Liabilities and Owner's Equity 592,650
 To record adjustments to restate Medina's capital

Leopoldo Medina, Capital

Office Supplies
Interest receivable
Merchandise Inventory
Allowance for Uncollectible accounts
Interest payable
Accumulated depreciation

To close the books of Medina

Notes payable
Accounts payable
Interest payable
Allowance for uncollectible accounts
Accumulated depreciation
Leopoldo Medina,Capital
Cash
Notes receivable
Accounts receivable
Interest receivable
Merchandise inventory
do Medina's Office supplies
Furniture and Fixtures

8% 100
25% 600 To record the investment of Medina
50% 2800
Cash
Notes receivable
Accounts receivable
Interest receivable
Merchandise inventory
Office supplies
Furnitures and Fixtures
Notes payable
Accounts payable
Interest payable
Allowance for uncollectible accounts
Leopoldo Medina, Capital

To record the investment of Dalangin

Cash
John Karlo Dalangin, Capital
 14,100
4,000
700
6,000
2,000
2,800
8,000

40,000
100,000
2,800
12,000
14,000
299,900
60,000
30,000
240,000
700
74,000
4,000
60,000

60,000
30,000
240,000
700
74,000
4,000
46,000
40,000
100,000
2,800
12,000
299,900
149,950
149,950
Illustrations: On June 30, 2018, Deogracia Corpuz and Esterlina Gevera, friendly competitors in a certain line of business, d
and capital to form a partnership. Their statements of financial position are as follows

Deogracia Corpuz
Statement of financial position
Jun. 30, 2018

Assets
Cash 50,000 3,500 46,500
Accounts Receivable 100,000 10% 90,000
Merchandise Inventory 80,000 80,000
Furniture and Fixtures 60,000 6,000 54,000
Total Assets 290,000 270,500

Liabilities and Owners Equity

Accounts Payable 30,000
Deogracia Corpuz, Capital 260,000
Total Liabilities and Owners Equity 290,000

The conditions and adjustments agreed upon by the partners for purposes
of determining their interests in the partnership are
1. Actual count and bank reconciliation on Corpuz propreitorship's cash account revealed
cash short and unrecorded expenses of P3,500
2. Establishment of a 10% allowance for uncollectible accounts in each book
3. The merchandise inventory of Gevera is to be increased by P10,000
4.The furniture and fixtures of Corpuz are to be depreciated by P6,000
5. The delivery equipment of Gevera is to be depreciated by P9,000

To record adjustments to restate Corpuz's capital.

Deogracia Corpuz, Capital 19,500

Cash 3,500
Allowance for uncollectible accounts 10,000
Accumulated depreciation 6,000

To close the books of Corpuz

Accounts payable 30,000

Allowance for Uncollectible accounts 10,000
Accumulated depreciation 6,000
Deogracia Corpuz, Capital 240,500
Cash 46,500
Accounts receivable 100,000
Merchandise Inventory 80,000
Furniture and Fixtures 60,000

Books of Partnership
To record investment of Corpuz

Cash 46,500
Accounts Receivable 100,000
Merchandise Inventory 80,000
Furniture and Fixtures 54,000
Accounts payable 30,000
Allowance for uncollectible accounts 10,000
Deogracia Corpuz, Capital 240,500

Corpuz and Gevera

Statement of financial position
June 30, 2018

Assets
Cash 86,500
Accounts Receivable 180,000
Allowance for Uncollectible accounts 18,000 162,000
Merchandise Inventory 190,000
Furniture and Fixtures 54,000
Delivery Equipment 81,000
Total Assets 573,500

Liabilities and Owners Equity

Accounts payable 90,000
Deogracia Corpuz, Capital 240,500
Esterlina Gevera, Capital 243,000
Total Liabilities and Owners Equity 573,500
in a certain line of business, decided to combine their talents

Esterlina Gevera
Statement of financial position
June 30, 2018

Assets
Cash 40,000 40,000
Accounts Receivable 80,000 10% 72,000
Merchandise Inventory 100,000 10,000 110,000
Delivery Equipment 90,000 9,000 81,000
Total Assets 310,000 303,000

Liabilities and Owners Equity

Accounts payable 60,000
Esterlina Gevera, Capital 250,000
Total Liabilities and Owners Equity 310,000

To record adjustments to restate Gevera's capital.

Merchandise Inventory
Esterlina Gevera, Capital
Allowance for uncollectible accounts
Accumulated depreciation

To close the books of Gevera

Accounts payable
Allowance for Uncollectible accounts
Accumulated depreciation
Esterlina Gevera, Capital
Cash
Accounts receivable
Merchnadise inventory
Delivery equipment
To record investment of Gevera

Cash
Accounts Receivable
Merchandise Inventory
Delivery Equipment
Accounts payable
Allowance for uncollectible accounts
Esterlina Gevera, Capital
573,500

10,000
7,000
8,000
9,000

60,000
8,000
9,000
243,000
40,000
80,000
110,000
90,000
 40,000
80,000
110,000
81,000
60,000
8,000
243,000