In absence of partnership deed, what are the accounting treatment Related: 01- Introduction to Partnership Accounting - Class 12 Accounts?

Question

In absence of partnership deed,  what are the accounting treatment Related:  01- Introduction to Partnership Accounting - Class 12 Accounts?

Answer

In the absence of PARTNERSHIP DEED  Partnership act 1932 must be followed

Answer

If deed is silent
no interest on capital
no interest on drawings
no salary or commission to partner
profit sharing ratio will be equal
6%interest on loan
any admission of partner with consent of all partners

Answer

Accounting Treatment in absence of Partnership Deed
In the absence of a partnership deed, the following accounting treatment can be followed:

Distribution of Profits and Losses
- Profits and losses are typically shared equally among partners unless otherwise agreed upon.
- In the absence of an agreement, profits and losses can be distributed based on the ratio of capital contributions made by each partner.

Interest on Capital
- Partners are entitled to interest on their capital at a rate specified in the absence of a partnership deed.
- The interest on capital is calculated based on the average capital balance of each partner during the accounting period.

Interest on Drawings
- Partners may be charged interest on drawings if there is no agreement in place.
- The interest on drawings is calculated based on the amount of drawings made by each partner during the accounting period.

Salary and Commission
- Partners are entitled to a salary or commission if there is no agreement on the matter.
- The salary or commission is typically based on the agreement reached by the partners or can be calculated based on the ratio of profits or capital contribution.

Decision Making
- In the absence of a partnership deed, major decisions may be taken by a unanimous vote of all partners.
- However, in day-to-day matters, decisions may be made by a majority vote unless otherwise specified.

Retirement or Death of a Partner
- In the absence of a partnership deed, the procedure for retirement or death of a partner may be determined based on the relevant laws or regulations.
- The remaining partners may have the option to buy out the share of the retiring or deceased partner based on the valuation method agreed upon.
This accounting treatment in the absence of a partnership deed helps in ensuring clarity and fairness in the financial dealings of the partnership.

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