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CMA Intermediate · Financial Accounting · Accounting of Limited Liability Partnership

Under the LLP Act 2008, a partner ceases to be a partner and the LLP agreement is silent on what he receives. Which entitlement does the Act give the former partner?

The former partner is entitled to the capital contribution he actually made plus his right to share in accumulated profits, after deducting accumulated losses, determined as at the date he ceased to be a partner. This applies unless the LLP agreement provides otherwise, under section 24(5).

  1. AHis capital contribution actually made, plus his right to share in accumulated profits after deducting accumulated losses as at the date of cessationCorrect
  2. BOnly the market value of his share in the LLP's net assets, fixed by the Registrar
  3. COnly his capital contribution actually made, with no right to accumulated profits
  4. DInterest at 12% p.a. on capital contribution until the date of payment

Explanation

Section 24(5) says that unless the LLP agreement provides otherwise, the former partner is entitled to an amount equal to the capital contribution actually made and the right to share in accumulated profits after deducting accumulated losses, determined as at the date of cessation. Option C omits the profit entitlement. The Act prescribes no Registrar valuation or interest rate.

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