A Partnership Is A Type Of Business Organizational Structure

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A. A partnership is a type of business organizational structure where two or more individuals join together voluntarily in a business as co-owners and each of them has unlimited personal liability for the debts of the partnership. When forming a partnership, each partner enters into an agreement that specifies not only the name of the company, location, scope of the business and the identity of the partners but also their ownership rights and obligations and distribution of profits or losses. Upon the formation of the partnership, each partner contributes capital into the company which can be either in a cash form (money) or non-cash form (other assets) such as equipment, machinery, etc. As the ownerships rights are divided among two or more partners, each partner has a separate capital and drawing account which tracks on their investments, distributions and share of gains and losses. The capital account is opened in their names in balance sheet and all transactions are accounted there. For illustration, if the investment from the partner is made on cash we debit the cash account and we credit the capital partner’s account. On the other hand, if the capital is introduced in non-cash form (assets), asset account is debited and partner’s capital account is credited normally at fair market value. As individuals provide cash or other assets to have a share in the capital of the partnership, there are two methods that can be used for handling such formation and organization of a
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