ADVANCED ACCOUNTING 1

PARTNERSHIP and CORPORATION

Chapter 6 Partnership Liquidation – Lump Sum
CHAPTER 6 PARTNERSHIP LIQUIDATION

 When a partnership dissolves, its affairs are not necessarily finished.

 For example, a partnership of two partners may admit a third partner.
 Or if one of the partners in a business withdraws, the remaining partners may continue to
operate the business.
 In such cases, a new partnership is formed and a new partnership agreement should be
prepared.
 Many partnerships provide for the admission of new partners and partner withdrawals in the
partnership agreement so that the partnership may continue operations without having to
execute a new agreement.
 Partnership dissolution calling for the winding up of business affairs, referred to as
liquidation, shall be discussed in this chapter.
 The association of the partners for the purposes of carrying on activities in the usual manner
is considered ended.
 In this case, partners can only engage in activities leading to the final settlement of business
affairs..
CHAPTER 6 PARTNERSHIP LIQUIDATION
DISSOLUTION WITH LIQUIDATION
 A partnership is liquidated when its business operations are completely terminated or ended.
 The partnership assets, if any are distributed to the partners as a return of their investments.
 Partnership dissolution with liquidation may be caused by any of the following factors:
1) The accomplishment of the purpose for which the partnership was organized.
2) The termination of the term/period covered by the partnership contract.
3) The bankruptcy of the firm.
4) The mutual agreement among the partners to close the business.
Accounting problems involved in the liquidation of a partnership:
1) Determination of the profit or loss from the beginning of the accounting period to the date of
liquidation and the distribution of such profit or loss;
2) Closing of the partnership books;
3) Correction of accounting errors in prior periods like overstatement or understatement of inventories,
excessive depreciation charges and failure to provide adequately for doubtful accounts;
4) Liquidation of the business.
CHAPTER 6 PARTNERSHIP LIQUIDATION
DEFINITON OF TERMS
a) Dissolution – the termination of a partnership as a going concern, it is the termination of the
life of a partnership.
b) Winding up – the process of settling the business or partnership affairs; it is synonymous to
liquidation.
c) Termination – the point in time when all partnership affairs are ended.
d) Liquidation – the interval of time between dissolution and termination of partnership affairs;
it is also the process of winding up a business which normally consists of conversion of assets
into cash, payment of liabilities and distribution of remaining cash among the partners.
e) Realization – the process of converting noncash assets into cash.
f) Gain on realization – the excess of the selling price over the cost of book value of the assets
disposed or sold through realization.
g) Loss on realization – the excess of the cost or book value over the selling price of the assets
disposed or sold through realization.
h) Capital deficiency – the excess of a partner’s share on losses over his capital.
CHAPTER 6 PARTNERSHIP LIQUIDATION
i) Deficient partner – a partner with a debit balance in his capital account after receiving his
share of the loss or realization.
j) Right of offset – the legal right to apply part or all of the amount owing to a partner on a loan
balance against a deficiency in his capital account resulting from losses in the process of
liquidation.
k) Partner’s interest – the sum of a partner’s capital, loan balance and advances to the
partnership.
TYPES OF LIQUIDATION
1) Lump sum liquidation by totals – this is a process whereby the distribution of cash to the
partners is done only after all the noncash assets have been realized, the total amount of gain
or loss on realization is known, and all liabilities have been paid.
2) Liquidation by installment or piecemeal liquidation – this is a process whereby assets are
realized on a piecemeal basis and cash is distributed to the partners on a periodic basis as it
becomes available even before converting all assets into cash.
CHAPTER 6 PARTNERSHIP LIQUIDATION
PROCEDURES IN LUMP SUM LIQUIDATION
 When a partnership is to be liquidated, the books should be adjusted and balances of nominal
accounts are closed.
The resulting net income of loss for the period is transferred to the partner’s capital accounts.
Advances and withdrawals are closed to capital accounts since cash settlement shall be based
on the partners’ capital account balances.
The partnership is then ready to proceed with liquidation as follows:
1) Sale of noncash assets and distribution or allocation of gain or loss on realization among the
partners according to their residual profit and loss ratios (salary and interest factors
disregarded) unless liquidation ratios are specified in the partnership agreement.
2) Distribution of cash to creditors and partners. Partnerships laws provide that the liabilities of
the partnership shall rank order payment as follows:
a) Priority I – those owing to creditors
b) Priority II – those owing to partners in respect of loans
c) Priority III – those owing to partners in respect of capital
d) Priority IV – those owing to partners in respect of profit
CHAPTER 6 PARTNERSHIP LIQUIDATION
Liquidation expenses may be incurred to facilitate the immediate realization of noncash assets.
Payment of liquidation expenses reduces cash and is recorded as a deduction from partners’
capital based on the partners’ profit and loss ratios.
When realization of assets in the course of liquidation results in a loss, the loss is carried to the
capital accounts of the partners as a deduction.
If a partner’s capital account result in a debit balance, called capital deficiency, after the
distribution of loss on realization, such can be offset against any loan balance of the partner to
the partnership.
The amount offset shall be the amount of the loan or the amount of deficiency, whichever is
lower.
 Cash can be distributed to partners before or after the elimination of the deficiency:
If cash is distributed after the elimination of the deficiency:
1) Capital deficiency is eliminated by
a) Making additional cash investment, if the deficient partner is solvent
b) Charging the deficiency as additional loss to the remaining partners, if the deficient
partner is insolvent.
CHAPTER 6 PARTNERSHIP LIQUIDATION
2) Cash available for distribution is then paid to partners to apply first on loan then on capital.
Note that the final distribution of cash to partners is made based on the partners’ capital
balances and not on any ratios.
If cash is distributed to partners before elimination of deficiency, the following procedure is
followed:
1) Cash available for distribution is paid to partners based on an accompanying schedule to
determine amounts to be paid to partners.
2) Deficient partners may
a) If solvent, make additional cash investments to be paid to partners as second cash
distribution, or the deficient partner may make direct cash settlement to the other
partners.
b) If insolvent, the deficiency shall be absorbed by the other partners as additional loss
according to their profit and loss ratio.
The personal status of partners (i.e., personal assets and personal liabilities) is sometimes
provided in the problem to indicate that a partner is solvent or insolvent
CHAPTER 6 PARTNERSHIP LIQUIDATION
When personal assets exceed personal liabilities, the partner is solvent to the extent of the
excess.
When personal assets are less than personal liabilities, the partner is insolvent.
Illustration: see next screen
CHAPTER 6 PARTNERSHIP LIQUIDATION
 Illustration: Ely, Fely and Gellie
Statement of Financial Position
31-Dec-18
Assets Liabilities and Capital
Cash 8,000 Liabilities 44,800
Other assets 136,000 Fely. Loan 2,000
Gellie, Loan 3,200
Ely, Capital (2) 38,000
Fely, Capital (2) 24,000
Gellie, Capital (1) 32,000

Total Assets 144,000 Total Liabilities and Capital 144,000

Case:
1) The other assets were sold for P140,000.
2) The other assets were sold for P100.,000.
3) The other assets were sold for P74,000.
4) The other assets were sold for P68,000. Deficient partner was solvent.
5) The other assets were sold for P68,000. Deficient partner was insolvent.
6) The other assets were sold for P68,000. Distribution of available cash is as follows:
a) before eliminating capital deficiency and
b) after eliminating capital deficiency
Required:
1) Prepare a statement of liquidation for each of the cases. For case 6, prepare also a schedule of cash
distribution.
2) Present journal entries to record the liquidation process.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Points of emphasis in the preparation of the statement of liquidation
1) Make sure that the balances before liquidation show equality of debits and credits. This will
always be true after each liquidation transaction.
2) Maintain two columns only for the debits, which are cash and other assets, regardless of
whether the assets were given itemized like cash, receivables, inventory, supplies, equipment,
etc. Noncash assets are classified as other assets.
3) Gain on realization increases capital while loss on realization decreases capital.
4) Figures in parenthesis for each liquidation transaction represent reduction in the account.
5) Double rule all columns when all columns are brought to zero balance.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 1: The other assets were sold for P140,000 (Gain on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 140,000 (136,000) 1,600 1,600 800
Balances 148,000 0 44,800 2,000 3,200 39,600 25,600 32,800
Payment of liabilities (44,800) (44,800)
Balances 103,200 0 0 2,000 3,200 39,600 25,600 32,800
Payment to partners (103,200) 0 0 (2,000) (3,200) (39,600) (25,600) (32,800)

Note: The other assets with a book value of P136,000 were sold for P140,000 resulting in a P4,000 gain on realization
distributed among the parners in their 2:2:1 ratio.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 1: The other assets were sold for P140,000 (Gain on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 140,000 (136,000) 1,600 1,600 800
Balances 148,000 0 44,800 2,000 3,200 39,600 25,600 32,800
Payment of liabilities (44,800) (44,800)
Balances 103,200 0 0 2,000 3,200 39,600 25,600 32,800
Payment to partners (103,200) 0 0 (2,000) (3,200) (39,600) (25,600) (32,800)

Note: The other assets with a book value of P136,000 were sold for P140,000 resulting in a P4,000 gain on realization
distributed among the parners in their 2:2:1 ratio.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 1: The other assets were sold for P140,000 (Gain on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 140,000 (136,000) 1,600 1,600 800
Balances 148,000 0 44,800 2,000 3,200 39,600 25,600 32,800
Payment of liabilities (44,800) (44,800)
Balances 103,200 0 0 2,000 3,200 39,600 25,600 32,800
Payment to partners (103,200) 0 0 (2,000) (3,200) (39,600) (25,600) (32,800)

Note: The other assets with a book value of P136,000 were sold for P140,000 resulting in a P4,000 gain on realization
distributed among the parners in their 2:2:1 ratio.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 1: The other assets were sold for P140,000 (Gain on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 140,000 (136,000) 1,600 1,600 800
Balances 148,000 0 44,800 2,000 3,200 39,600 25,600 32,800
Payment of liabilities (44,800) (44,800)
Balances 103,200 0 0 2,000 3,200 39,600 25,600 32,800
Payment to partners (103,200) 0 0 (2,000) (3,200) (39,600) (25,600) (32,800)

Note: The other assets with a book value of P136,000 were sold for P140,000 resulting in a P4,000 gain on realization
distributed among the parners in their 2:2:1 ratio.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 1: The other assets were sold for P140,000 (Gain on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 140,000 (136,000) 1,600 1,600 800
Balances 148,000 0 44,800 2,000 3,200 39,600 25,600 32,800
Payment of liabilities (44,800) (44,800)
Balances 103,200 0 0 2,000 3,200 39,600 25,600 32,800
Payment to partners (103,200) 0 0 (2,000) (3,200) (39,600) (25,600) (32,800)

Note: The other assets with a book value of P136,000 were sold for P140,000 resulting in a P4,000 gain on realization
distributed among the parners in their 2:2:1 ratio.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 1: The other assets were sold for P140,000 (Gain on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 140,000 (136,000) 1,600 1,600 800
Balances 148,000 0 44,800 2,000 3,200 39,600 25,600 32,800
Payment of liabilities (44,800) (44,800)
Balances 103,200 0 0 2,000 3,200 39,600 25,600 32,800
Payment to partners (103,200) 0 0 (2,000) (3,200) (39,600) (25,600) (32,800)

Note: The other assets with a book value of P136,000 were sold for P140,000 resulting in a P4,000 gain on realization
distributed among the parners in their 2:2:1 ratio.
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 1: The other assets were sold for P140,000 (Gain on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 140,000 (136,000) 1,600 1,600 800
Balances 148,000 0 44,800 2,000 3,200 39,600 25,600 32,800
Payment of liabilities (44,800) (44,800)
Balances 103,200 0 0 2,000 3,200 39,600 25,600 32,800
Payment to partners (103,200) 0 0 (2,000) (3,200) (39,600) (25,600) (32,800)

Note: The other assets with a book value of P136,000 were sold for P140,000 resulting in a P4,000 gain on realization
distributed among the parners in their 2:2:1 ratio.
CHAPTER 6 PARTNERSHIP LIQUIDATION
The entries to record the liquidation process are as follows:
a) Realization of assets and distribution of gain on realization, 2:2:1
Cash 140,000
Other assets 136,000
Ely, Capital (P4,000 x 2/5) 1,600
Fely, Capital (P4,000 x 2/5) 1,600
Gellie, Capital (P4,0000 x 1/5) 800
b) Payment of liabilities
Liabilities 44,800
Cash 44,800
c) Payment to partners
Fely, Loan 2,000
Gellie, Loan 3,200
Ely, Capital 39,600
Fely, Capital 25,600
Gellie, Capital 32,800
Cash 103,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 2: The other assets were sold for P100,000 (Loss on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 100,000 (136,000) (14,400) (14,400) (7,200)
Balances 108,000 0 44,800 2,000 3,200 23,600 9,600 24,800
Payment of liabilities (44,800) (44,800)
Balances 63,200 0 0 2,000 3,200 23,600 9,600 24,800
Payment to partners (63,200) 0 0 (2,000) (3,200) (23,600) (9,600) (24,800)

Note: The other assets with a book value of P136,000 were sold for P100,000 resulting in a P36000 loss on realization
distributed among the parners in their 2:2:1 ratio and can be fully absorbed by the capital balances of all the partners.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 2: The other assets were sold for P100,000 (Loss on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 100,000 (136,000) (14,400) (14,400) (7,200)
Balances 108,000 0 44,800 2,000 3,200 23,600 9,600 24,800
Payment of liabilities (44,800) (44,800)
Balances 63,200 0 0 2,000 3,200 23,600 9,600 24,800
Payment to partners (63,200) 0 0 (2,000) (3,200) (23,600) (9,600) (24,800)

Note: The other assets with a book value of P136,000 were sold for P100,000 resulting in a P36000 loss on realization
distributed among the parners in their 2:2:1 ratio and can be fully absorbed by the capital balances of all the partners.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 2: The other assets were sold for P100,000 (Loss on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 100,000 (136,000) (14,400) (14,400) (7,200)
Balances 108,000 0 44,800 2,000 3,200 23,600 9,600 24,800
Payment of liabilities (44,800) (44,800)
Balances 63,200 0 0 2,000 3,200 23,600 9,600 24,800
Payment to partners (63,200) 0 0 (2,000) (3,200) (23,600) (9,600) (24,800)

Note: The other assets with a book value of P136,000 were sold for P100,000 resulting in a P36000 loss on realization
distributed among the parners in their 2:2:1 ratio and can be fully absorbed by the capital balances of all the partners.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 2: The other assets were sold for P100,000 (Loss on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 100,000 (136,000) (14,400) (14,400) (7,200)
Balances 108,000 0 44,800 2,000 3,200 23,600 9,600 24,800
Payment of liabilities (44,800) (44,800)
Balances 63,200 0 0 2,000 3,200 23,600 9,600 24,800
Payment to partners (63,200) 0 0 (2,000) (3,200) (23,600) (9,600) (24,800)

Note: The other assets with a book value of P136,000 were sold for P100,000 resulting in a P36000 loss on realization
distributed among the parners in their 2:2:1 ratio and can be fully absorbed by the capital balances of all the partners.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 2: The other assets were sold for P100,000 (Loss on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 100,000 (136,000) (14,400) (14,400) (7,200)
Balances 108,000 0 44,800 2,000 3,200 23,600 9,600 24,800
Payment of liabilities (44,800) (44,800)
Balances 63,200 0 0 2,000 3,200 23,600 9,600 24,800
Payment to partners (63,200) 0 0 (2,000) (3,200) (23,600) (9,600) (24,800)

Note: The other assets with a book value of P136,000 were sold for P100,000 resulting in a P36000 loss on realization
distributed among the parners in their 2:2:1 ratio and can be fully absorbed by the capital balances of all the partners.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 2: The other assets were sold for P100,000 (Loss on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 100,000 (136,000) (14,400) (14,400) (7,200)
Balances 108,000 0 44,800 2,000 3,200 23,600 9,600 24,800
Payment of liabilities (44,800) (44,800)
Balances 63,200 0 0 2,000 3,200 23,600 9,600 24,800
Payment to partners (63,200) 0 0 (2,000) (3,200) (23,600) (9,600) (24,800)

Note: The other assets with a book value of P136,000 were sold for P100,000 resulting in a P36000 loss on realization
distributed among the parners in their 2:2:1 ratio and can be fully absorbed by the capital balances of all the partners.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 2: The other assets were sold for P100,000 (Loss on realizatin, no captial deficiency).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 100,000 (136,000) (14,400) (14,400) (7,200)
Balances 108,000 0 44,800 2,000 3,200 23,600 9,600 24,800
Payment of liabilities (44,800) (44,800)
Balances 63,200 0 0 2,000 3,200 23,600 9,600 24,800
Payment to partners (63,200) 0 0 (2,000) (3,200) (23,600) (9,600) (24,800)

Note: The other assets with a book value of P136,000 were sold for P100,000 resulting in a P36000 loss on realization
distributed among the parners in their 2:2:1 ratio and can be fully absorbed by the capital balances of all the partners.
CHAPTER 6 PARTNERSHIP LIQUIDATION
The entries to record the liquidation process are as follows:
a) Realization of assets and distribution of gain on realization, 2:2:1
Cash 100,000
Ely, Capital 14,400
Fely, Capital 14,400
Gellie, Capital 7,200
Other assets 136,000
b) Payment of liabilities
Liabilities 44,800
Cash 44,800
c) Payment to partners
Fely, Loan 2,000
Gellie, Loan 3,200
Ely, Capital 23,600
Fely, Capital 9,600
Gellie, Capital 24,800
Cash 63,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Case 3: The other assets were sold for P74,000 (Loss on realizatin, captial deficiency, right of offset).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio resulting in a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has
a loan to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 74,000 (136,000) (24,800) (24,800) (12,400)
Balances 82,000 0 44,800 2,000 3,200 13,200 (800) 19,600
Payment of liabilities (44,800) (44,800)
Balances 37,200 0 0 2,000 3,200 13,200 (800) 19,600
Offset of loan against debit balance in Fely capital (800) 800
Balances 37,200 0 0 1,200 3,200 13,200 0 19,600
Payment to partners (37,200) 0 0 (1,200) (3,200) (13,200) 0 (19,600)

Note: The other assets with a book value of P136,000 were sold for P74,000 resulting in a P62,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely. The right of offset can be exercised in as much as Fely has a loan
to the partnership.
CHAPTER 6 PARTNERSHIP LIQUIDATION
The entries to record the liquidation process are as follows:
a) Realization of assets and distribution of gain on realization, 2:2:1
Cash 74,000
Ely, Capital 24,800
Fely, Capital 24,800
Gellie, Capital 12,400
Other assets 136,000
b) Payment of liabilities
Liabilities 44,800
Cash 44,800
c) Offset of loan against capital deficiency
Fely, Loan 800
Fely, Capital 800
d) Payment to partners
Fely, Loan 1,200
Gellie, Loan 3,200
Ely, Capital 13,200
Gellie, Capital 19,600
Cash 37,200
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 4: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is solvent and
invests additional cash before cah distribution to partners.
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Additional investment by Fely 1,200 1,200
Balances 32,400 0 0 0 3,200 10,800 0 18,400
Payment to partners (32,400) 0 0 0 (3,200) (10,800) 0 (18,400)

Note: The other assets with a book value of P136,000 were sold for P68,000 resulting in a P68,000 loss on realization distributed among
the parners in their 2:2:1 ratio and a debit balance in the capital of Fely that can not be fully absorbed by her loan. The deficient partner
cancels her deficiency by making additional cash investment. By doing so, the partnership will satisfy all its liabilities including the other
CHAPTER 6 PARTNERSHIP LIQUIDATION
The entries to record the liquidation process are as follows:
a) Realization of assets and distribution of gain on realization, 2:2:1
Cash 68,000
Ely, Capital 27,200
Fely, Capital 27,200
Gellie, Capital 13,600
Other assets 136,000
b) Payment of liabilities
Liabilities 44,800
Cash 44,800
c) Offset of loan against capital deficiency
Fely, Loan 2,000
Fely, Capital 2,000
d) Deficient partner who is solvent makes additional cash investment
Cash 1,200
Fely, Capital 1,200
e) Payment to partners
Gellie, Loan 3,200
Ely, Capital 10,800
Gellie, Capital 18,400
Cash 32,400
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 5: The other assets were sold for P68,000 (Loss on realizatin, captial deficiency, right of offset, deficient partner is insolvent and her
deficiency is shared by the other partners before cash distribution to partners).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Addl loss to partners for the deficiency of Fely (2:1) (800) 1,200 (400)
Balances 31,200 0 0 0 3,200 10,000 0 18,000
Payment to partners (31,200) 0 0 0 (3,200) (10,000) 0 (18,000)
CHAPTER 6 PARTNERSHIP LIQUIDATION
The entries to record the liquidation process are as follows:
a) Realization of assets and distribution of gain on realization, 2:2:1
Cash 68,000
Ely, Capital 27,200
Fely, Capital 27,200
Gellie, Capital 13,600
Other assets 136,000
b) Payment of liabilities
Liabilities 44,800
Cash 44,800
c) Offset of loan against capital deficiency
Fely, Loan 2,000
Fely, Capital 2,000
d) Capital deficiency of insolvent partner absorbed as additional loss of remaining partners (2:1 ratio).
Ely, Capital 800
Gellie, Capital 400
Fely, Capital 1,200
e) Payment to partners
Gellie, Loan 3,200
Ely, Capital 10,000
Gellie, Capital 18,000
Cash 31,200
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
 CHAPTER 6 PARTNERSHIP LIQUIDATION
Case 6: The other assets were sold for P68,000. Additional cash investment by deficient partner is to be made as second cash distribution to
partners. All available cash I immediately distributed to partners requiring a schedule to accompany the statement of liquidation in order to
determine amounts to be paid to partners (loss on relization, capital deficiency, right of offet, and cash distributions).
Ely, Fely and Gellie
Statement of Liquidation
Deember 31, 2018
Loan Capital
Other
Cash Assets Liabilities Fely Gellie Ely Fely Gellie
Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 8,000 136,000 44,800 2,000 3,200 38,000 24,000 32,000
loss
Sale of assets and distribution of gain 68,000 (136,000) (27,200) (27,200) (13,600)
Balances 76,000 0 44,800 2,000 3,200 10,800 (3,200) 18,400
Payment of liabilities (44,800) (44,800)
Balances 31,200 0 0 2,000 3,200 10,800 (3,200) 18,400
Offset of loan against debit balance in Fely capital (2,000) 2,000
Balances 31,200 0 0 0 3,200 10,800 (1,200) 18,400
Payment to partners (per scdl or simply 2:1 for deficiency) (31,200) 0 0 0 (3,200) (10,000) (18,000)
Balances 0 0 0 0 0 800 (1,200) 400
Additional cash investment by Fely 1,200 0 0 0 0 0 1,200 0
Balances 1,200 0 0 0 0 800 0 400
Payment to partners (1,200) 0 0 0 0 (800) 0 (400)
CHAPTER 6 PARTNERSHIP LIQUIDATION
The schedule to accompany the statement of liquidation shows amounts to be paid to partners.
Total partners’ interest is reduced by the restricted interest for possible losses, in case the
deficient partner fails to pay her deficiency.
Restricted interest for possible losses shall continue up to the point when deficiencies or debit
balances in capital are eliminated.
When deficiencies are eliminated, balances are called Free Interest – amount to be paid to
partners, to apply first on loan, then on capital.
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION

Ely, Fely and Gellie

Schedule of Cash Distribution to Partners
Deember 31, 2018
Capital

Ely Fely Gellie

Profit and loss ratio (2) 40% (2) 40% (1) 20%
Balances before liquidation 10,800 (1,200) 18,400
Additional loan balance 3,200
Total partners' interest 10,800 (1,200) 21,600
Restricted nterest - possible loss of P1,200 to Ely and Gellie
in 2:1 raito if Fely fails to pay her deficiency (800) 1,200 (400)
Fee Interest - amoun to be paid to partners 10,000 0 21,200
Payment to apply on:
Loan 3,200
Capital 10,000 18,000
Cash distribution (to statement of liquidation) 10,000 0 21,200
CHAPTER 6 PARTNERSHIP LIQUIDATION
The entries to record the liquidation process are as follows:
a) Realization of assets and distribution of gain on realization, 2:2:1
Cash 68,000
Ely, Capital 27,200
Fely, Capital 27,200
Gellie, Capital 13,600
Other assets 136,000
b) Payment of liabilities
Liabilities 44,800
Cash 44,800
c) Offset of loan against capital deficiency
Fely, Loan 2,000
Fely, Capital 2,000
d) Payment to partners
Gellie, Loan 3,200
Ely, Capital 10,000
Gellie, Capital 18,000
Cash 31,200
CHAPTER 6 PARTNERSHIP LIQUIDATION
e) Additional cash investment from deficient solvent partner
Cash 1,200
Fely, Capital 1,200
f) Second cash distribution
Ely, Capital 800
Gellie, Capital 400
Cash 1,200
g) If the deficient partner makes direct cash settlement to partners, the entry is as follows:
Ely, Capital 800
Gellie, Capital 400
Fely, Capital 1,200
CHAPTER 6 PARTNERSHIP LIQUIDATION
CALCULATION OF CASH SETTLEMENT WITHOUT THE AID OF A STATEMENT OF LIQUIDATION
 Usually, liquidation problems do not require the preparation of a statement of liquidation but calls only
for the calculation of cash settlement to partners.
 In such cases, assuming, noncash assets have already been converted to cash, liabilities have been
settled but capitals remain as to their balances before liquidation since the gain or loss on realization of
noncash assets has not yet been carried to capital.
 Any difference between the debits (available cash to partners) and total credits (loans and capitals) is a
gain or loss on realization that must first be carried to capital before proceeding with the liquidation
process.
Illustration:
 At December 31, 2018, the capital balances of the partners Gerry, Gary and Genny are P160,000,
P100,000 and P20,000 respectively.
 Profits and losses are shared in the ratio of 3:2:1.
 The partners decided to liquidate and sold all the assets for P148,000l cash.
 After paying all the liabilities amounting to P48,000, they still have P112,000 cash left for distribution.
 The loss on realization is the excess of the credits (total capital) over the debits (cash left for
distribution).
CHAPTER 6 PARTNERSHIP LIQUIDATION
Total capital (P160,000 + P100,000 + P20,000) 280,000
Less: Cash left for distribution to partners 112,000
Loss on realization of assets 168,000
 Cash settlement to partners is computed as follows:
Gerry Garry Genny
Profit and loss ratio (3:2:1) 50% 33% 17%
Capital balances before liquidation 160,000 100,000 20,000
Loss on realization shared in 3:2:1 ratio (84,000) (56,000) (28,000)
Balances 76,000 44,000 (8,000)
Additional loss to Gerry and Garry for the
deficiency of Genny shared in 3:2 ratio (4,800) (3,200) 8,000
Cash settlement 71,200 40,800 0

 There may be instances where cash realized from the sale of other assets is not sufficient to pay
partnership liabilities.
 In such cases, remaining liabilities are satisfied by:
1) The additional cash investment by deficient and solvent partners.
2) Direct collection by the partnership creditors from any one of the partners and the latter making cash
settlement among themselves.
CHAPTER 6 PARTNERSHIP LIQUIDATION