Investment by partners may be made in the form of cash or others asset as provided in the partnership contract. When assets other than cash are invested, it is necessary for the partners to agree upon the value such assets. The assets record in accordance with the agreement, and the capital accounts are credited for the amount of the respective investment.
The importance of proper valuation of asset invested by partners cannot be overemphasized. The values originally assigned to asset are credit to to the partners investing the assets and become measurement of his assets; subsequent sales of these assets at amount other than book value result in profits and loss item that are divided in the profits and loss ratio. If equity is to be achieved; then, assets invested by partners should be reported at their fair market value; only increases or decreases in the value of such assets taking place during the term of partnership will be allocated among the partners.
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