Liquidation Process of Partnership

Liquidation is a cessation of company operations (dissolution of the business) is whole or in part by selling the entire company's assets, pay all tax debts, liabilities to third parties and the remainder distributed to the partners the ratio of profit or loss.

The process of dissolution of this effort involves two phases:

1. Realization Process

That is the process of converting existing assets into cash (cash).

2. Liquidation Process

 Is the process of repayment of debts to creditors and repayment of the remaining capital to its members.

The process of Liquidation:

1. Bookkeeping accounts shall be adjusted and closed. Profit and net loss during the last period taken into account to the capital account of each, after that alliance is said to be ready for liquidation.

2. In the process of converting assets into cash (cash) if there is a difference between book value and the realization that show gains or losses should divided among members according to the ratio of distribution of profit (loss). Balance of capital subsequently used as the basis for settlement.

3. If found a state in which one member has a debit balance in capital account, on the other hand, she had a receivable to the partnership, then receivable to the partnership was used to cover a debit balance of capital account concerned. In addition, in principle, if a member of a deficit then the other members are obliged to close it first.

4. If cash is available to be divided, then first of all to be paid prior to its external creditors, only then paid the balances capital of each member.

Liquidation can be done as follows:

1. Sales of non-cash assets as well (Simultaneously Liquidation)

2. Sales of non-cash assets in stages (Gradual Liquidation)

3. Cash-sharing program

• Non-cash asset sales as well (Simultaneously Liquidation)

Accounting procedures in the liquidation of a partnership is non-cash asset sales as well to pay all obligations to third parties, if any remaining cash is distributed to its allies.

• Sales of non-cash assets in stages (Gradual Liquidation)

If the implementation of the liquidation takes long time (because of the realization of assets could not at once), then the repayment of investments the members can be done gradually in accordance with the amount of available cash. Repayment rights inclusion of the members made after all the obligations of the fellowship

(Debts to creditors) are paid in full. Liquidation process is called as gradual liquidation (gradually).

• Gradual Liquidation Process:

1. If at the first stage of a new majority of assets can be realized (sold), then must first be paid all obligations to creditors.

2. The remaining money (cash) from the sale of assets and then paid to the members as repayment of its rights shares.

3. The results of the realization of assets on the next steps and then paid to the members.

This process continues until it is executed with owned assets can be realized in full.

The method used:

There are two methods that can be used to determine the amount of each payment back right of members to be guaranteed inclusion received each member of it accordance with the rights in question as follows:

a. The amount of the repayment rights of participation are determined periodically every time AAU assets can be realized (sold).

b. Planning priority of payment to members prior to the liquidation process lasts, so the payment can be made in accordance with the amount of money available.

Cash Distribution Program

Cash-sharing program will assist with the sale of assets liquidation procedure non cash in stages that require counting the master list (liquidation) and the list additional lots.