Visitors Online: 3271 | Saturday 03rd December 2016
CBSE Guess > eBooks > Class XII > Accountancy
Partnership Accounts - Fundamentals
- What is Partnership?
Ans.: Partnership is an association of persons who agree to combine their financial resource and managerial abilities to run a business and share the profits of that business in an agreed ratio.
- Define Partnership.
Ans. According to Partnership Act, 1932 (Section- 4), “Partnership is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all.”
- List any four main elements/characteristics of partnership.
Ans. Characteristics of Partnership:
(a) Two or more persons: For a valid partnership, there must be at least two persons. The maximum number of partners in a firm carrying onanking business should not exceed 10 and in any other business twenty.
(b) Agreement: There must be an agreement. Because, partnership come into existence after an agreement has been entered into by two or more persons or entities. It may be oral or written.
(c) Legal Business: A partnership can be formed only for the purpose of carrying on a business. The business of partnership must be legal.
(d) Sharing of profits: The agreement between the partners must be to share the profits of the business. The sharing of profits also includes sharing of losses.
(e) Mutual Agency: Partnership business may be carried on by all or any of them acting for all. Each partner acts as an agent of other partners every partner whether participating in management or not will be held liable for the acts of other partners in ordinary course of business.
- What is meant by the term partners firm and firm name?
Ans. The persons who have entered into partnership are known individually as partners and collectively as form. The name in which the partnership business is carried on is called firm name.
- What is Partnership Deed?
Ans. Partnership deed is an agreement. It contains terms and conditions, which are agreed upon by all the partners, through which the business of the firm is governed and managed. It may be written or oral. It also contains the e rights, duties, powers and obligations of the partners.
- What is the importance of a written partnership deed?
- Why it is necessary to have a partnership deed in writing?
Ans. According to the Partnership Act, it is not necessary that it must be written, i.e. it may be oral or written. However, to avoid all kinds of misunderstanding and disputes among the partners, it must be a written agreement duly signed by all the respective partners and registered under the act. In case of any dispute among partners, it can be produced as evidence in the court.
- List any four contents of a partnership deed.
Ans. The partnership deed usually includes the following:
- Name and address of the firm.
- Name and addresses of all partners.
- Date of commencement of partnership.
- Capital to be contributed by each partner.
- Whether interest is to be allowed on capital.
- Whether any partner is to be allowed salary.
- The profit sharing ratio.
- The duties of each partner.
- Modes of settlement of accounts in case of retirement/death of a partner.
- What are the rules/ provision applicable in the absence of partnership deed?
Ans. Rules/Provisions applicable in the absence of partnership deed: No interest on capital is to be allowed. No interest on drawings is to be charged. No salary or remuneration is to be allowed to any partner. No commission is to be allowed to any partner. Profits or losses are to be shared equally by all partners. Interest on partner’s loan is to be allowed @6% per annum.
- Neha and Sandhya were partners in a firm without any partnership deed. What should be?
In the following cases if:
(I) Neha has invested Rs.2,00,000 and Sandhya has invested Rs. 1 ,00,000 as capital. wants interest on capital @ 12% p.a. whereas Sandhya wants it to be 15% p.a.
(ii) Neha has given loan to the firm on which she claims an interest @ 12% p.a.
- Ashish, Dev and Hirnanshu are partners in a firm with no partnership deed. They differ
following points. State the rules on the basis of which their disputes can be settled.
- (I) Ashish want the profit sharing ratio to be as 2 : 1 : 3. (ii) Dev wants a salary in the firm of Rs 24,000.
(iii) Himanshu wants a commission on sales @ 5% p.a.
(iv) Dev and Himanshu want interest on their loans @ 10% p.a.
(v) Ashish wants interest on capital @ 6% p.a.
(VI) Ashish and Dev wants interest on drawing @ 15% p.a
- A and B are partners. They do not have any partnership agreement (partnership deed).
should be done in the following cases?
(I) A spends twice the time that B devotes to business. Claims that he should get a salary
Of Rs. 3,000 per month for his extra time spent.
(ii) B has provided a capital o Rs. 25,000 whereas A has provided Rs. 5,000 only as cap'
A however, has provided Rs. 10,000 as loan to the firm. What interest (if any) will be given
To A and B?
(iii) A wants to introduce his son Sunil into his business. B objects to it.
(iv) B wants that profit should be distributed in the ratio of capitals but A wants that it should be distributed equally. [CBSE 1991 Set I (Outside Delhi)
A and B are partners in a firm sharing profits in the ratio of3 : 2. They had advanced to the firm
a sum of Rs. 40,000 as a loan in their profit sharing ratio on July 1st 1998. The partnership d
is silent on the question of interest on loan from partners. Compute the interest payable by the
firm to the partners, assuming the firm closes its books on December 31st.
- M and N are partners in a firm, M has given a loan of Rs. 8,000 to the firm on I April 1994. The partnership deed is silent upon the question of provision of interest on partner's loan. Compute the amount of interest payable on the loan advanced by M to the firm assuming the books are closed on 31st December each year.
Mr Amit Sehgal
B.Com, M.Com. , B.Ed.
SURBHI Institute of Commerce