PPT - Accounting for Partnerships Commerce Notes | EduRev

Accountancy Class 12

Created by: Nipun Tuteja

Commerce : PPT - Accounting for Partnerships Commerce Notes | EduRev

 Page 1


ACCOUNTING FOR 
PARTNERSHIP FIRM –
FUNDAMENTALS
Page 2


ACCOUNTING FOR 
PARTNERSHIP FIRM –
FUNDAMENTALS
Meaning of Partnership
• A partnership firm is an 
association of two or more 
persons to carry on a legal 
business and share its profits or 
losses. The persons who join 
hands together to do a business 
are individually known as partners 
and collectively a firm.
Page 3


ACCOUNTING FOR 
PARTNERSHIP FIRM –
FUNDAMENTALS
Meaning of Partnership
• A partnership firm is an 
association of two or more 
persons to carry on a legal 
business and share its profits or 
losses. The persons who join 
hands together to do a business 
are individually known as partners 
and collectively a firm.
.
• According to Sec 4 of the Indian 
Partnership Act, 1932, "the term 
partnership is the relation between 
two or more persons who have 
agreed to share the profit of the 
business carried on by all or any of 
them acting for all
Page 4


ACCOUNTING FOR 
PARTNERSHIP FIRM –
FUNDAMENTALS
Meaning of Partnership
• A partnership firm is an 
association of two or more 
persons to carry on a legal 
business and share its profits or 
losses. The persons who join 
hands together to do a business 
are individually known as partners 
and collectively a firm.
.
• According to Sec 4 of the Indian 
Partnership Act, 1932, "the term 
partnership is the relation between 
two or more persons who have 
agreed to share the profit of the 
business carried on by all or any of 
them acting for all
Essential elements of Partnership
•1 . At least two persons: There must be at 
least two persons to form a partnership and all 
such persons must be competent to contract.
•2. Agreement: There must be an agreement 
to form a partnership. This agreement can be oral 
or written.
•3 . Legal Business: An agreement should be 
for the purpose of carrying on the business or 
profession. The business to be carried on by the 
partners should be legal.
Page 5


ACCOUNTING FOR 
PARTNERSHIP FIRM –
FUNDAMENTALS
Meaning of Partnership
• A partnership firm is an 
association of two or more 
persons to carry on a legal 
business and share its profits or 
losses. The persons who join 
hands together to do a business 
are individually known as partners 
and collectively a firm.
.
• According to Sec 4 of the Indian 
Partnership Act, 1932, "the term 
partnership is the relation between 
two or more persons who have 
agreed to share the profit of the 
business carried on by all or any of 
them acting for all
Essential elements of Partnership
•1 . At least two persons: There must be at 
least two persons to form a partnership and all 
such persons must be competent to contract.
•2. Agreement: There must be an agreement 
to form a partnership. This agreement can be oral 
or written.
•3 . Legal Business: An agreement should be 
for the purpose of carrying on the business or 
profession. The business to be carried on by the 
partners should be legal.
.
• •4 . Profit Sharing: The agreement between the 
partners must be to share the profits or losses of 
the business in the particular ratio.
• •5 Mutual agency: There should be a mutual 
agency relationship among the partners. 'Mutual 
Agency' relationship means that each partner is 
both an agent and the principal. Each partner is 
an in the sense that he can bind the other 
partners by his acts done.
6. Number of partners: The minimum limit of the 
partners in a firm is two and maximum number of 
partners in a banking firm should be 10 and in the 
other firm should be 20.
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