Partnership Liquidation by Instalment (Safe Payment)
Partnership Liquidation by Instalment (Safe Payment)
1. Record the sale of assets and distribute any gains or losses among
the partners using their profits and loss ratio
2. Pay liquidation expenses, if any, and divide these among the partners
using the P/L ratio
3. Pay the liabilities to outside creditors. Liabilities should be paid in full,
or cash sufficient to ensure the payment of all liabilities, including
estimated liquidation expenses should be withheld.
4. Distribute cash to the partners after possible future losses have been
divided to partners in accordance with an advance distribution plan or
schedule of safe payments
Realization of Assets
1. Determine the total interest of each partner. Loan o a partner and loan
from a partner, if any, shall be added to or deducted from the capital
balance to obtain the total interest of each partner.
A B C
Capital P60,000 P80,000 P100,000
Loss on
)6,000) (9,000) (15,000)
realization in jan
Balance P54,000 P71,000 P85,000
A B C
Total Interest P54,000 P71,000 P85,000
Possible Loss 30,000 45,000 75,000
Payment to
P24,000 P26,000 P10,000
Partners
After the distribution of available cash, the partners' capital balances are A-
P30,000, B-P45,000 and C-P75,000. The capital balances are now equal to
the agreed profit and loss ration which is 2:3:5. Therefore, any further
installment payments in February and March can be safely made on the
agree profit and loss ratio without preparing a schedule of safe payments
ABC Company
Statement of Partnership Liquidation
January -March 2019
Other
Cash Liabilities A Capital B Capital C Capital
Assets
Balance 10,000 310,000 80,000 60,000 80,000 100,000
January Realization 130,000 -160,000 -6,000 -9,000 -15,000
Balance 140,000 150,000 80,000 54,000 71,000 85,000
Pay Liab -80,000 -80,000
Balance 60,000 150,000 0 54,000 71,000 85,000
Sched of Payment 1 -60,000 -24,000 -26,000 -10,000
Balance 0 150,000 0 30,000 45,000 75,000
February Realization 48,000 -84,000 -7,200 -10,800 -18,000
Balance 48,000 66,000 0 22,800 34,200 57,000
Payment to Partners -48,000 -9,600 -14,400 -24,000
Balance 0 66,000 0 13,200 19,800 33,000
march realization 24,000 -66,000 -8,400 -12,600 -21,000
Balance 24,000 0 0 4,800 7,200 12,000
Payment to Partners -24,000 -4,800 -7,200 -12,000