Class 12 accountancy accounting for partnership firm-fundamental notes

Accounting for Partnership Firm...Short & Easy Notes for Board Exam

#1. what is Partnership? What are its Characteristics?

=> As such mentioned in Section-4 of the Indian Partnership Act 1932, when two or more person are ready to start a legal business, carried by all or any of them acting for all. The share of profit are distributed among themselves in agreed ratio.
The members of the firm individually called Partners and jointly called Firm.
Following are its Characteristics;
i. There should be minimum 2 and maximum 50 partners.
ii. There should be an agreement between the partners, it may be written or oral.
iii. There should be a legal business.
iv. Partnership does not have a separate entity.
v. The liabilities of partners are unlimited.
vi. No transfer of interest without the consent of any other partners.
vii. Distribution of profit are essential.

#2. What is Partnership deed? What are its essential elements?

=> Written agreement between the partners are called Partnership deed. It contain rules and regulations, terms and conditions.
Following are its essential elements;
i. Name and address of the firm
ii. Name and address of the partners.
iii. Objective of the firm
iv. Capital introduced by the partners.
v. Amount withdrawn by the partners.
vi. Interest allowed on capital.
vii. Interest charge on withdrawing.
viii. Distribution of profit.
ix. Salaries and commission payable to the partners.
x. Duration of the business.
xi. Right and duties of the partners.
xii. Preparation of accounts and their audit.
xiii. Method of calculation of goodwill at the time of retirement and death of the partners.
xiv. Procedure for, in case of admission, retirement and death of the partners.
                                      Partnership deed should be signed by all partners. It must be stamped.

#3. What do you mean by Limited Liability Partnership (LLP)? What are its Essential elements?
=> Limited Liability Partnership came in existence in 2008, under this type of partnership, liabilities of partners are limited.
Following are its Essential element;
i. It is created by law.
ii. It has separate legal entity.
iii. Registration of LLP is mandatory.
iv. Minimum 2 and maximum no limit of its partners.
v. Liability of partners are limited.
vi. Must file a solvency certificate every year to the registrar of the company.

#4. What are the rights of the partners?
=> Following are the rights of the partners;
i. Every partners has right to participate in management.
ii. Every partner has right to give his opinion on all matters.
iii. Every partner has right to record the book of accounts and copy them.
iv. Every partners has right to receive payment from their firm. For payment made by him on behalf of the firm.
v. Right to retire from the firm.


#5. What are the duties of the partner?
=> following are the duties of the partners;
i. Bound to carry on the business of the firm.
ii. Bound to faithful to each other.
iii. Bound to render true accounts and full information to any partners.
iv. Bound to receive loss.
v. No partner can transfer the interest without the consent to others.
vi. Use firms property exclusively for the firm.


#6. What do you mean by profit and loss appropriation account?
=> Profit and Loss appropriation account is the extension of profit and loss account. It shows the all partners obligation.
Following are its characteristics;
i. It is a nominal account.
ii. It records all partners obligation.
iii. It is prepared by partnership firm.
iv. Its main objective is to know the divisible profit or divisible loss.
v. It is an extension of profit and loss account.

#8. Difference between profit &loss account and Profit &Loss appropriation account.
=> Profit and loss account;
i. It is prepared by all business concern.
ii. It is prepared after trading account.
iii. It record indirect income and expense.

iv. Its main objective is to know the net profit or net loss.
v. Matching principle followed.

Profit and loss appropriation account;
i. It is prepared by partnership firm.
ii. It is prepared after profit and loss account.
iii. It records all partners obligation.
iv. Its main objective is to know divisible profit or divisible loss.
v. Matching principle is not followed.


#9. Difference between fixed capital and fluctuating capital.
=> Fixed capital;
i. Two accounts are maintained for each partners.
(A) Capital A/c (B) Current A/c
ii. The balance of capital remain the same in each years.
iii. All adjustment entries are recorded in current account.
iv. The balance of capital account always shows credit balance.
v. Balance of current account may be debit or credit.

Fluctuating capital;
i. Only one account is maintained for each partners
(A) Capital A/c
ii. The balance of capital change from year to year.
iii. All adjustment entries are recorded in capital account.
iv. The balance of capital account may be debit or credit.
v. There are no existence of current account.

POINTS;
i. Indian Partnership Act passed in 1932.
ii. A minor cannot be admitted as a partner.
iii. Provision in absence of partnership deed :-
     (A) Profit are share equally.
     (B) No interest allowed on capital.
     (C) No interest charged on drawing.
     (D) Interest allowed on partner's Loan @ 6% P.A. 
     (E) No salaries, Commission given to partners.

        THE END

GOODWILL

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