accounting for partnership firm
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Accounting for partnership firm Fundamentals
Need of partnership firm:-there are certain limitation of a soletrader.in a sole trading concern only one man invests capital; undertakes the risk invilved in the business and controls the whole affairs of the business.
Partnership is a relation of mutual trust and faith.in order to maintain this trust,it is necessary that the partnership accounts be maintained in an honest,accurate and equitable manner.
Essential elements of partnership:
. Two or more persons:- there must be at least two persons to form a partnership. Partnership act does not specify the maximum number of person ,but the Indian companies act,1956,restricts the number of partners to 10 for a partnership carrying on banking business and 20 in case of other kinds of business.
Agreement :-partnership is the result if an
agreement. It must come into existence and not by the operation of law.
.Existence of business and profit motive :-partnership can be formed for the propose of carrying on some
business with the intention of earning profits and such business must be legal.
. Sharing of profit :-the agreement
between the partners must be aimed at sharing the
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profits of the business. if some persons join hands to run some charitable activity, it will not be called partnership.