NOTES OF ACCOUNTING FOR PARTNERSHIP FIRMS-FUNDAMENTALS CLASS XII ACCOUNTS:-
Nature Of Partnership-
• According to the view of accounting:
Partnership is a separate business entity.
• According to the view of legally:
Partnership is not separate legal entity.
Characteristics/Features of Partnership-
The main features of Partnership are:
1- Two or more partners.
2- An agreement.
3- A lawful business.
4- Profit-sharing.
5- Business can be carried on by all or any of the partners acting for all.
Rights Of Partners-
The main rights of partners are:
1- Every partner has right to share the profit or loss of a business in agreed ratio.
2- Every partner has right to share in asset of a business.
3- Every partner has right to participate in management of a business.
Partnership Deed-
Partnership comes into existence with terms and conditions, such terms and conditions either oral or written.
Such a written document which contains the terms of Partnership, called partnership deed.
Contents of the partnership deed are as follows:
i- Name and address of the firm.
ii- Names and addresses of the partners.
iii- Nature of the Partnership business.
iv- Profit-sharing ratio among the partners.
v- Amount of capital contribution by every partner.
vi- Rate of interest on capital.
vii- Amount of drawings by every partner.
vii- Rate of interest on drawings.
ix- Date of commencement of business.
x- Salary or commission to every partner.
xi- Advances or loan taken by firm from a partner.
xii- Rate of interest on loan.
xiii- Terms of admission, retirement or death of a partner.
xiv- Auditing of Partnership account.
xv- Settlement of disputes.
Rules applicable in the absense of Partnership Deed-(sec.12 to sec.17)
1- Profit or loss will be share in equal ratio.
2- No interest is to be allowed on capital.
3- No interest is to be charged on drawings.
4- No partner is entitled to get a salary or commission or remuneration.
5- Partner is entitled to get interest on loan. @ 6% p.a.
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