9706 · 3.1.2
Partnerships: Changes and Dissolution
Welcome to the advanced study of partnerships! While you're familiar with the basics, this lesson focuses on the dynamic nature of partnerships and the accounting adjustments required when things change. For Paper 3, you must be proficient in preparing accounts for events like a new partner joining, a partner leaving, or the entire partnership being dissolved. We'll break down each scenario step-by-step, focusing on the key accounts you need to master: Revaluation, Realisation, Capital, and Current accounts.
Need to know
What you need to know
- **Inherent (or Non-purchased) Goodwill:** This is the internally generated goodwill that a business builds over time. It is not recorded in the financial statements as per accounting standards, as its value is subjective and not based on a transaction.
- **Purchased Goodwill:** This arises when one business buys another. The amount paid over and above the fair value of the net identifiable assets acquired is recorded as purchased goodwill. This is the only type of goodwill that appears on a statement of financial position.