Partnership is a form of business organization where two or more individuals come together to carry on a business with a view to making a profit. The status of partnership from an accounting viewpoint is as follows:

Separate Business Entity

Partnership is considered a separate business entity from its owners. This means that the partnership is a distinct legal entity apart from its partners. It can enter into contracts, borrow money, own assets, and incur liabilities in its own name. It can also sue and be sued in its own name.

Partnership Agreement

The partnership agreement is a legal document that outlines the terms and conditions of the partnership. It sets out the rights and responsibilities of the partners, the profit-sharing ratio, and other important matters related to the partnership.

Capital Contribution

Each partner contributes capital to the partnership, which becomes the property of the partnership. The partnership uses this capital to finance its operations and investments. The capital contribution of each partner determines their share in the profits and losses of the partnership.

Profit and Loss Sharing

The profits and losses of the partnership are shared among the partners according to the profit-sharing ratio specified in the partnership agreement. This ratio may be equal or may vary depending on the capital contribution, skills, and expertise of each partner.

Taxation

Partnership is not taxed as a separate entity. Instead, the profits and losses of the partnership are passed through to the partners, who report them on their individual tax returns. Partners are also responsible for paying self-employment taxes on their share of the partnership income.

Conclusion

In conclusion, partnership is considered a separate business entity from its owners. However, it is not taxed as a separate entity. The profits and losses of the partnership are passed through to the partners, who report them on their individual tax returns.