Procedure to open books of partnership

At the time of formation of partnership, each partner contributes his capital either in the form of cash or non-cash. Separate accounts of capital are opened to record the investment of each partner. The partner can invest in the business in any of the following ways.

  • By contributing cash.
  • By contributing non-cash assets.
  • By combining individual business.

By contributing cash

If contribution is made in cash, CASH ACCOUNT will be debited and respective partner’s capital account will be credited with one’s respective contribution. For example:

A, B, form a partnership contributing $100,000 and $50,000 respectively in the form of cash. The journal entry will be

By contribution cash journal entry


John and Harry agreed to form a partnership on 1st January 2018. For this purpose, John contributed $4,50,000 and Harry $1,50,000.



By contribution cash General journal example

By contribution cash balance sheet example

By contributing non-cash assets

If non-cash is invested, debit will be given to asset invested at the amount agreed by all the partners and credit to partner’s respective capital. For example, A and B form partnership. A .invested $1,00,000 in the form of cash, B provides building to the partnership, the agreed value of which is $80,000 the journal entry will be as such:

By contribution non-cash assets journal entry


John and Harry formed a partnership on 1st January 2018. John contributed Cash $3,00,000 and building $4,00,000 for the business. Harry contributed cash $4,00,000 and furniture $50,000.


  • Journal Entry
  • Opening Balance Sheet of the firm


By contribution non-cash assets General Journal Example

By contribution non-cash assets Balance Sheet Example

By combining individual business

Sometimes partnership is formed by combination of two or more business. For this purpose the journal entry will be:

By contributing individual business journal entry


John and Harry carrying on separate business agreed to form a partnership on 1st January 2018, by combining their individual business. On this date, their balance sheets were as under:

By contributing individual business example1.1

By contributing individual business example-1

All assets and liabilities will be taken over by the firm at book value.


  • Pass the Journal entry to form the partnership.
  • Prepare opening Balance Sheet of the firm.


By contributing individual business general journal

By contributing individual business balance sheet

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