Conversion into a company-partnership, Financial Accounting

Assignment Help:

CONVERSION INTO A COMPANY

The partners may convert their business and trade in form of a company. This may be due to some of the advantages a company has over a partnership. E.g. Limited liability of members and the number of members of a company can be more than twenty with an exception to professional firms.

The objective of accounting for conversions is to ensure that nay profit or loss on conversion is reported and shared between the partners and the opening position of the company is ascertained.

The procedure therefore involves closing off the books of the partnership and preparing the opening balance sheet of the company. A realization account thus used to facilitate the process and the balance on the realization account is the profit or loss on conversion which is closed off to the partners capital accounts.

The book values of the assets being taken over by the company will be posted to the debit side and the liabilities will be posted to the credit side. The purchase consideration paid by the company to the partners will be posted on the credit side of the realization account. If the expenses of formation are to be borne of the partners or the partnership, then this will be posted to the debit side of the realization account.


Related Discussions:- Conversion into a company-partnership

Financial reporting, Describe Following questions:- Q.1 What organizatio...

Describe Following questions:- Q.1 What organizations are responsible for governing financial reporting? What is the role of each organization? How have the roles changed in the

Introduction to pension funds, Introduction to Pension funds Pension fu...

Introduction to Pension funds Pension funds are normally set up to provide pension benefits to employees who have retired. The pension funds receive contributions mainly from e

Quantitative techniques, Evaluate 1-1/3(5/6 - 1/2) ---------------- 2/5 / ...

Evaluate 1-1/3(5/6 - 1/2) ---------------- 2/5 / 2/5(5/6-2/3)

Define current liability, The following items represent liabilities on a fi...

The following items represent liabilities on a firm's balance sheet: a. An amount of money owed to a supplier based on the terms 2/20, n/40, for which no note was executed. b. An a

Calculate total annual interest, Q. Chrissy currently has a credit card tha...

Q. Chrissy currently has a credit card that charges 15 percent interest. She usually carries a balance of about $500. Chrissy has received an offer for a new credit card with a tea

Prepare general journal entries, Assessment Criteria: Student work will ...

Assessment Criteria: Student work will generally be assessed in terms of the following criteria: 1. Preparation of correct journal entries. 2. Accumulation of journal entr

Qualitative characteristics , Since 1968, Dracula Limited has traded in Don...

Since 1968, Dracula Limited has traded in Doncaster, South Yorkshire as a manufacturer of fancy-dress and theatrical costumes. It produces a wide range of general theatrical costum

Show danger of high financial gearing, Q. Show danger of high financial gea...

Q. Show danger of high financial gearing? A additional danger of high financial gearing is that a company may move into a loss-making position as a result of high interest paym

Future rates of return, Assume your grandparents have just given you $20,00...

Assume your grandparents have just given you $20,000 on the condition that you invest the money in the stock market. As you contemplate making your investment choices, what account

What are the potential benefits of implementing abc, Question 1: (a) De...

Question 1: (a) Define program evaluation. (b) Discuss the four types of program evaluation that are usually carried in the Public Sector. Question 2 (a) You have

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd