Accounting for Partnership Firms - Fundamentals
Notes
1. Meaning of Partnership:
- A partnership is a relationship between two or more persons who agree to share profits and losses of a
business carried on by all or any one acting for all.
- Governed by the Indian Partnership Act, 1932.
2. Features of Partnership:
- Agreement (oral or written)
- Two or more persons
- Sharing of profits
- Mutual agency
- Unlimited liability
3. Partnership Deed:
- A written agreement among partners, also called Articles of Partnership.
- Contents may include: Name and address, Capital contribution, Profit-sharing ratio, Salary/commission,
Interest on capital/drawings, etc.
4. Provisions of Indian Partnership Act (in absence of deed):
- Profit-sharing ratio - Equal
- No interest on capital or drawings
- No salary or commission to partners
- Interest on loan by partner - 6% p.a.
Notes
1. Meaning of Partnership:
- A partnership is a relationship between two or more persons who agree to share profits and losses of a
business carried on by all or any one acting for all.
- Governed by the Indian Partnership Act, 1932.
2. Features of Partnership:
- Agreement (oral or written)
- Two or more persons
- Sharing of profits
- Mutual agency
- Unlimited liability
3. Partnership Deed:
- A written agreement among partners, also called Articles of Partnership.
- Contents may include: Name and address, Capital contribution, Profit-sharing ratio, Salary/commission,
Interest on capital/drawings, etc.
4. Provisions of Indian Partnership Act (in absence of deed):
- Profit-sharing ratio - Equal
- No interest on capital or drawings
- No salary or commission to partners
- Interest on loan by partner - 6% p.a.
