Partnership is defined as the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. A partnership deed is an agreement between partners that outlines the terms of the partnership, including profit/loss sharing, salaries, capital contributions, and what happens if a new partner joins or the partnership dissolves. The partnership deed brings clarity to the partners by specifying these policies. It should include the name and addresses of the partners, nature of business, start date, duration, capital contributions, profit sharing ratios, and whether capital contributions are fixed or fluctuating. In the absence of a partnership deed, profit sharing is equal and interest cannot be charged on capital, drawings

1. Financial Accounting -IV
K.Prabha

2. Partnership- Fundamentals
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▸ Definition:
According to session 4 of the Indian partnership Act 1932,
Partnership is defined as “ the relationship between persons, who have a
agreed to share the profits of a business carried on by all any of them
acting of all”. Persons making an agreement to carry business for common
purpose are called partners individually and collectively. The name under
which their business is carried is called the firm name.

3. Features of Partnership
▸ There must be on agreement entered into between to two or
more persons.
▸ The object of the agreement must be to share the profit of the
business.
▸ The business must be carries on by all or any of the persons
concerned acting for all.
▸ It is formed to carry on a lawful business.
▸ It is an association of two or more persons.
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4. Partnership Deed
Partnership deed is an agreement between the partners of a firm that
outlines the terms and conditions of partnership among the partners. A
partnership firm is one of the popular types of organizations for starting a new
business. The smooth and successful running of a partnership firm requires
clear understanding among its partners regarding the various policies
governing their partnership. The partnership deed serves this purpose. It
specifies the various terms such as profit/loss sharing, salary, interest on
capital, drawings, admission of a new partner, etc. in order to bring clarity to
the partners.
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5. How do you write a partnership deed?
▸ Name and Address of the firm as well as all the partners.
▸ Nature of business to be carried on.
▸ Date of Commencement of business.
▸ Duration of Partnership (whether for a fixed period/project)
▸ Capital contribution by each partner.
▸ Profit sharing ratio among the partners.
▸ The ratio of sharing profits and losses.
▸ whether captials are to be fixed and fluctuating.
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6. Rules applicable in the absence of partnership deed
▸ Profit sharing Ratio should be equal.
▸ Interest on Capital: No Interest on Capital is to be allowed to any
Partner
▸ Interest on Drawings: No interst on Drawings is to be charged from
any Partner
▸ Salary on Commission to a Partner Not Allowed
▸ Interest on loan by a Partner: Interest is allowed @6% per annum
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