Unit 4: Financial Statements of Partnerships
A description of partnerships and merits as a form of ownership
As mentioned in study unit 1, a partnership consists of a minimum of 2
partners that conducts business with a similar goal in mind.
Partnerships are not subjected to the same rigorous laws as companies
therefore it is relatively easy to initiate a partnership.
All partners are liable for any debts that is incurred from the operations
of the partnership.
This means any partner can be held liable for unpaid debt if the creditor
is confident that the outstanding balance can be collected.
, Unit 4: Financial Statements of Partnerships
Advantages and disadvantages of partnerships
Advantages Disadvantages
Easy to start a partnership
Less competition due to collaboration All partners are held liable for any debts incurre
Increase capital contribution Partners are allowed to use the business as
collateral
Different skills sets can contribute to the advance Death or resignation can have a negative result
of the partnership the partnership
New partnerships can be created if one or more
Partners leave
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