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CPT Fundamentals of Accounting: 
Chapter 8 – Unit 1 
 
CA. V.K. Jain 
 
Page 2


CPT Fundamentals of Accounting: 
Chapter 8 – Unit 1 
 
CA. V.K. Jain 
 
Features of a partnership firm and need of partnership deed 
Points to be covered in a partnership deed 
Technique of maintaining  P & L Appropriation Account 
Methods of maintaining partners capital accounts, namely fixed and fluctuating 
Partners capital and current accounts 
Treatment of Interest on Capital and Drawings, Salaries / Commission / Bonus / 
Remuneration etc. to partners 
Page 3


CPT Fundamentals of Accounting: 
Chapter 8 – Unit 1 
 
CA. V.K. Jain 
 
Features of a partnership firm and need of partnership deed 
Points to be covered in a partnership deed 
Technique of maintaining  P & L Appropriation Account 
Methods of maintaining partners capital accounts, namely fixed and fluctuating 
Partners capital and current accounts 
Treatment of Interest on Capital and Drawings, Salaries / Commission / Bonus / 
Remuneration etc. to partners 
Indian partnership act – “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” 
Essential features: 
Association of two or more persons 
Agreement - verbal/oral or in writing 
Existence of business – legal- recognition in the eyes of law  
Page 4


CPT Fundamentals of Accounting: 
Chapter 8 – Unit 1 
 
CA. V.K. Jain 
 
Features of a partnership firm and need of partnership deed 
Points to be covered in a partnership deed 
Technique of maintaining  P & L Appropriation Account 
Methods of maintaining partners capital accounts, namely fixed and fluctuating 
Partners capital and current accounts 
Treatment of Interest on Capital and Drawings, Salaries / Commission / Bonus / 
Remuneration etc. to partners 
Indian partnership act – “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” 
Essential features: 
Association of two or more persons 
Agreement - verbal/oral or in writing 
Existence of business – legal- recognition in the eyes of law  
Carrying of business by all of them or any of them acting for all 
Sharing of profits  
Unlimited liability  
Sharing of profits – not necessarily losses 
Mutual agreement 
Relationship - principal and agent    
Page 5


CPT Fundamentals of Accounting: 
Chapter 8 – Unit 1 
 
CA. V.K. Jain 
 
Features of a partnership firm and need of partnership deed 
Points to be covered in a partnership deed 
Technique of maintaining  P & L Appropriation Account 
Methods of maintaining partners capital accounts, namely fixed and fluctuating 
Partners capital and current accounts 
Treatment of Interest on Capital and Drawings, Salaries / Commission / Bonus / 
Remuneration etc. to partners 
Indian partnership act – “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” 
Essential features: 
Association of two or more persons 
Agreement - verbal/oral or in writing 
Existence of business – legal- recognition in the eyes of law  
Carrying of business by all of them or any of them acting for all 
Sharing of profits  
Unlimited liability  
Sharing of profits – not necessarily losses 
Mutual agreement 
Relationship - principal and agent    
Persons entered into partnership with one another are    
individually called partners and collectively a firm 
Name under which business of the firm is carried on is 
called firm name 
Maximum limit of partners: 
• Indian Partnership Act 1932 is silent on this issue  
• According to Companies Act 1956, maximum limit of partners for a 
Banking Company is 10 and of other is 20. A partnership firm 
becomes illegal if number of partners exceeds the said limit 
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FAQs on PPT : Introduction to Partnership Accounts - Accountancy Class 12 - Commerce

1. What is a partnership account?
Ans. A partnership account refers to a financial account that records the financial activities and transactions of a partnership. It helps in tracking the investments made by partners, the distribution of profits and losses, and the overall financial position of the partnership.
2. How are profits and losses divided in a partnership account?
Ans. Profits and losses in a partnership account are divided based on the agreed-upon partnership agreement. Generally, partners share profits and losses in proportion to their capital contributions. However, partners can also agree to divide profits and losses equally or in any other ratio as per their mutual understanding.
3. Can a partnership account have more than two partners?
Ans. Yes, a partnership account can have more than two partners. A partnership can be formed with two or more individuals or entities who agree to share the profits and losses of a business. The number of partners can vary depending on the partnership agreement.
4. How are partner's capital accounts maintained in a partnership account?
Ans. Partner's capital accounts in a partnership account are maintained by recording their initial investments, additional investments, withdrawals, and their share of profits or losses. Each partner has a separate capital account, which reflects their ownership interest in the partnership.
5. What is the importance of maintaining a partnership account?
Ans. Maintaining a partnership account is important as it helps in tracking the financial performance of the partnership, ensuring transparency among partners, and facilitating the distribution of profits and losses. It also provides crucial information for making financial decisions and preparing financial statements for external reporting purposes.
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