Partnership is a type of business organization where two or more individuals agree to jointly own and manage a business. Each partner contributes capital, skills, labor, or property to the partnership and shares in the profits and losses of the business.


There are different types of partners in a partnership, including:

• General partners - they have unlimited liability and are actively involved in the management of the business.


• Limited partners - they have limited liability and are not involved in the day-to-day management of the business.


• Sleeping partners - they invest capital in the business but do not participate in the management of the business.


• Active partners - they are involved in the management of the business and may also invest capital.

A partnership agreement is a legal document that outlines the terms and conditions of the partnership. It includes information such as the name of the partnership, the contributions of each partner, the profit-sharing ratio, the responsibilities of each partner, and the process for dissolving the partnership.


In accounting, partnership is treated as a separate entity from its partners. The partnership has its own set of books and accounts, including a capital account for each partner and a profit and loss account for the partnership.

• Capital Account - Each partner has a separate capital account that reflects their initial investment in the partnership, additional capital contributions, and their share of profits or losses. The capital account is also adjusted for any withdrawals made by the partner.


• Profit and Loss Account - The partnership's profit and loss account shows the income and expenses of the business. The net profit or loss is then distributed among the partners according to their profit-sharing ratio.


• Drawings Account - Partners may withdraw money from the partnership for personal use. These withdrawals are recorded in a separate account called the drawings account.

In a partnership, the profits are taxed as personal income of the partners. The partnership itself does not pay any taxes. Each partner is responsible for reporting their share of the partnership's income on their personal tax return.


Partnership is a popular form of business organization that allows individuals to pool their resources and expertise to run a business. Understanding the accounting and taxation aspects of partnership is crucial for the smooth running of the business.

A partnership is a business structure whereby two or more people share ownership; these partners share any profits, but also the costs, risks, and responsibilities involved with the running of the business. Keeping on top of your accountingand finances is essential for the growth of a business.