2. Outline:
• Meaning & Definition of Partnership.
• Features of Partnership.
• Partnership Deed & its contents.
• Provisions of Partnership act 1932 in the absence of
partnership deed.
• Accounts of Partnership firm.
• Methods of maintaining Partner’s Capital a/c.
• Calculation of Interest on Drawings.
• Preparation of Profit & Loss appropriation a/c.
• Guarantee of Profits.
3. Meaning & Definition of Partnership:
According to Section 4 of Indian Partnership Act
1932 partnership refers to “the relationship between the
persons who agree to share the profit of the business
carried on by all (or) any of them acting for all’’.
Any association of two (or) more persons who carry
on the business jointly with the intention(aim) of profit is
called Partnership. Persons making an agreement to carry
the business for common purpose are called partners
individually & firm collectively.
Indian Partnership Act 1932 regulates the
partnership business in India. As per this act it is not
compulsory for the partnership firm to get registered in
India, it is optional.
4. Features of Partnership:
i) Two (or) more persons:
There must be two (or) more persons to
constitute a partnership. A single person cannot enter
into partnership with himself. The maximum number
of persons can be partners in a firm is 10 in case of
firm carrying banking business & 20 in case of firm
carrying any other business.
ii) Agreement:
Partnership is a result of agreement between
two (or) more persons of a business & share the profits
& losses. Such agreement must be in writing.
5. Features of Partnership:
iii) Lawful business:
The agreement between the partners must be to
carry some business with the intention of earning
profits & such business must be within the limits of
the law.
iv) Sharing of profit:
The agreement between the partners must be to
share profit of the business. The partners may share
the profits in any ratio they like as per the agreement.
6. Partnership Deed:
When the partnership agreement is written &
signed by all the partners & duly stamped according to
the stamp act, it is called as partnership deed. It is also
called as Articles of Partnership Deed.
Contents of Partnership Deed:
• Name of the firm.
• Name & address of the partners.
• Nature of the business.
• Principle place of the business.
• Date of commencement of the business.
7. Contents of Partnership Deed:
• Duration of the partnership firm.
• Amount of capital contributed by each partner.
• Amount of withdrawal (drawings) that can be made
by each partner.
• Profit sharing ratio.
• Rate of interest on partner’s capital, loan & drawings.
