Advance Financial Accounting: Avoid Plagiarism Due Date

Advance Financial Accountingavoid Plagiarismdue Date

The subject is Advanced Financial Accounting Avoid plagiarism, Due date 22/3/2020 at 4:00 pm (the date is very important) words 1. Select an Organization Doing Partnership business(give introduction and mention the type of activity it does) 2. Points in the Partnership agreement 3. Capital Contribution decision and Profit & Loss sharing ratios. 4. Accounts to be adjusted on admission of a new Partner. 5. Conclusion (Your opinion on Partnership business)

Paper For Above instruction

Introduction to the Organization and its Business

The organization selected for this analysis is "GreenTech Builders," a partnership firm specializing in sustainable construction and eco-friendly building solutions. Established in 2015, GreenTech Builders has grown to become a recognized name in the construction industry, emphasizing green architecture, energy-efficient designs, and environmentally responsible building methods. The firm's core activities include designing, planning, constructing residential, commercial, and institutional buildings utilizing environmentally sustainable materials and techniques. The partnership model among the owners allows for shared responsibilities, pooled resources, and combined expertise to promote eco-conscious urban development.

Points in the Partnership Agreement

The partnership agreement of GreenTech Builders outlines essential operational and financial arrangements among the partners. Key points include:

- The purpose and scope of the partnership, aiming to undertake sustainable construction projects.

- The capital contributions of each partner, including cash, assets, and intellectual property.

- Profit and loss sharing ratios, usually based on capital contributions but also considering individual expertise and effort.

- Responsibilities and roles of each partner concerning project management, client dealings, and operations.

- Procedures for admitting new partners and retirement or withdrawal of existing partners.

- Decision-making processes and voting rights.

- Dispute resolution mechanisms.

- Dissolution clauses, including asset liquidation and settlement procedures.

Capital Contributions and Profit & Loss Sharing Ratios

In the initial phase, partners contributed capital as follows: Partner A invested $100,000 in cash, Partner B contributed equipment valued at $50,000, and Partner C contributed intellectual property rights worth $25,000. The profit and loss sharing ratios were agreed based on these contributions, with a default 1:1:1 ratio, but adjusted to reflect the initial investments—possibly in proportion to their contributions, such as 4:2:1 respectively. These ratios guide how profits are distributed and losses are absorbed among the partners, influencing future financial planning and profit allocations.

Adjustments in Accounts Upon Admission of a New Partner

The admission of a new partner, Partner D, requires several adjustments within the partnership's accounts. First, the capital accounts are re-evaluated to reflect the new partner's capital contribution, say $50,000 cash. Goodwill may be recorded if the new partner's contribution exceeds the fair value of net assets, representing the value of reputation or future earning capacity. Existing partners' capital accounts are adjusted accordingly to maintain the agreed profit-sharing ratios. Revaluation of assets may be necessary to accurately reflect market values, and the partnership agreement should specify how to handle such revaluations. The admission affects profit-sharing ratios, which are typically revised based on the new partner’s contribution, possibly leading to an updated profit and loss sharing ratio such as 4:2:1:1.

Conclusion: Personal Opinions on Partnership Business

Partnership businesses offer a flexible and collaborative approach to entrepreneurship, leveraging combined expertise and resources for mutual benefit. From my perspective, partnerships foster a sense of shared responsibility and can enhance innovation through diverse skills. However, they also pose risks related to disagreements, unequal contribution, and potential conflicts among partners. Clear agreements and transparent operations are essential to mitigate these risks. Overall, when well-managed, partnership enterprises can be highly effective, especially in fields like construction where teamwork and shared vision are critical to success. Their ability to adapt quickly and allocate responsibilities efficiently makes them a valuable business structure, provided that partners maintain open communication and uphold their fiduciary duties.

References

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