1. Starting a business for the first time.

Illustration:
On January 2, 20A, Alfredo Yao, Vic Bacani and Larry Cacho formed a partnership business with the following contrib

A. Yao (General Partner), Shares profits 45% 100,000

V. Bacani (Limited Partner), Shares profit 45%
Motorcycle, P120,000 with liability P15,000 which
to be assumed by the partnership
L. Cacho's contributions will his personal services, shares profit 10%

Journal Entry:
Cash 100,000
A, Yao, Capital 100,000

Transportation equipment 120,000

Accounts Payable 15,000
V. Bacani, Capital 105,000

Mr. Larry Cacho was admitted in the partnership as an industrial partner with a 10% share in profit.

2. Sole Proprietorship converted into partnership

Lachica Trading
Balance Sheet
As of June 20A

Assets
Cash in Bank 100,000 Cash in Bank
Merchandise Inventory 80,000 Accounts Receivable
Equipment 60,000 Allow. For Bad debts
Acc. Depreciation 20,000 40,000 Merchandise Inventory
Total Assets 220,000 Total Assets

Liability and Owner's Equity

Liability
Notes Payable 20,000 Accounts payable

Owner's Equity
N. Lachica, Capital 200,000 D. Dizon, Capital
Total Liability and Owner's Equity 220,000 Total Liability and Owner's E

Openning entry:
Cash in Bank 100,000 Cash in Bank
Merchandise Inventory 80,000 Accounts Receivable
Equipment 40,000 Merchandise Inventory
Notes Payable 20,000 Allow. For Bad debts
N. Lachica, Capital 200,000 Accounts payable
 D. Dizon, Capital

Socsargen Traders
Balance Sheet
As of July 1, 20A

Assets
Cash in Bank 250,000
Accounts Receivable 40,000
Allow. For bad debts 2,000 38,000
Merchandise Inventory 200,000
Equipment 40,000
Total Assets 528,000

Liability and Partner's Equity

Liability
Accounts payable 30,000
Notes Payable 20,000 50,000

Partner's Equity
N. Lachica, Capital 200,000
D. Dizon, Capital 278,000
Total Liability and Owner's Equity 528,000

Revaluation of Assets
Guide 1 - If the asset has a "contra-assets" of "asset offset" account, the adjustment is made
through this contra account

Sample:
Accounts Receivable 80,000
Allow. For Doubtful Accounts 3,000
Net Realizable Value 77,000

Computation:
Accounts Receivable 80,000
Required Allowance 10%
8,000
Less: The recorded 3,000
Needed amount for adjustment 5,000

Journal entry:
Proprietor, Capital 5,000
Allow. For Doubtful Accounts 5,000

Sample 2:
Building 120,000
Less: Acc. Depreciation 70,000
 Net Book Value 50,000

Per Book Per Appraisal

Building 120,000 120,000
Less: Acc. Depreciation 70,000 40,000 30,000
Net Book Value 50,000 80,000

Accu. Depreciation 30,000

Proprietor, Capital 30,000

Guide 2: If the asset does not have the contra account, the adjustmet is made to the asset account itself.

Sample:
Land account showed a balance of P60,000 as per record, As agreed, this land has a fair market value of P100,00

FMV 100,000
Per record 60,000
Net Adjustment 40,000

Land 40,000
Proprietor, Capital 40,000

Inventory
Actual value 35,000
Inventory per record 40,000
Net decrease -5,000

Proprietor, Capital 5,000

Merchandise 5,000

Recognition of liability:
Assume: An accrued interest on Notes Payable was not yet recorded, P500.

Proprietor, Capital 500

Accrued Interest Expense 500
ess with the following contributions:

are in profit.

Dizon Enterprises
Balance Sheet
As of June 20A

Assets
150,000
ccounts Receivable 40,000
low. For Bad debts 2,000 38,000
erchandise Inventory 120,000
Total Assets 308,000

Liability and Owner's Equity

Liability
Accounts payable 30,000

Owner's Equity
D. Dizon, Capital 278,000
Total Liability and Owner's Equity 308,000

150,000
ccounts Receivable 40,000
erchandise Inventory 120,000
Allow. For Bad debts 2,000
Accounts payable 30,000
D. Dizon, Capital 278,000
account itself.

fair market value of P100,000.