rohan acs ppt (1)
TRANSCRIPT
According to Indian partnership Act 1932:-“Partnership is the relation between
persons who have agreed to share the profits of a business carried on by all or any
of them acting for all.”
What is Partnership
Partnership is established by an oral or written agreement. It is
better to have agreement in writing to avoid any dispute.
This written document is known as PARTNERSHIP DEED.
It is a legal document signed by all partners and has clauses.
Partnership Deed
Contents of a partnership deed:A partnership deed deals with the following matters: Name and address of the partnership firm. Names and addresses of the partners. Nature of the business proposed by the firm. Amount of capital to be contributed by each partner. The profit sharing ratio among partners. Duration of partnership, if any. Amount, which can be withdrawn by each partner. Amount of salary or commission payable to any partner for his services to the firm. Rate of interest allowed to the partners on their capital. Rate of interest to be paid on drawings by the partners.
RULES APPLICABLE IN THE ABSENCE
OF PARTNERSHIP DEED
1. Profit sharing Ratio : Profits and losses would be shared equally among partners.2. Interest on capital : No interest on capital would be allowed to partners. If there is an agreement to allow interest on capital it is to be allowed only in case of profits.3. Interest on drawings: No interest on drawings would be charged from partners.4. Salary: No salary or commission is to be allowed to partners.5. Interest on Loan : If a partner has provided any Loan to the firm, he would be paid Interest at the rate 6% p.a. This interest on loan is a charge against profits i.e. it is to be allowed even if there are losses to the firm.6. Admission of a new partner: A new Partner can be admitted only with the consent of all the existing partners.
Profit and Loss Appropriation Account
Profit and Loss Appropriation Account Is Thus an extension of the profit and loss account. IN
case Of partnership firm it is an account showing distribution of
profit among partners as per partnership deed.
Interest on Drawings
Interest on drawings represent the interest charged on drawings made by the partners according to the partnership deed.
This interest is not a business income or gain. Rather it forms part of the distributable income. It is treated just opposite to interest on capital.
Difference between P&L A/c and P&L Appropriation A/c
Profit and Loss Account Profit and Loss Appropriation Account
It is prepared after the preparation of Trading A/c.
It is prepared by all the business concerns.
This account does not have opening and closing balance of profit.
It is prepared after the preparation of Profit and Loss A/c.
It is prepared by partnership firms and companies.
This account may have both opening as well as closing balance.
Interest on capital
Interest on capital is allowed to a partner to compensate for contributing capital to the firm in excess of the profit sharing ratio.
Interest on capital is computed on the opening balance of the partner’s firm.
SALARY OR COMMISSION
Salary or commission to partners is allows if the partnership deed allows it to be paid.
Salary or commission to a partner is an appropriation of profit not a charge against the profit. In other words it is to be allowed only if profit is earned.
Particulars Rs. Particulars Rs.
To Profit and Loss A/c(loss transferred from Profit & Loss A/c)
To Salaries of Partners
To Commission to Partners
To Interest on Partners' Capitals
To Reserve A/c
To Profit transferred to Partners capital or current account
By Profit and Loss account(Profit transferred from P & L account)
By Interest on Drawings
By Loss transferred to Partners' capital or current accounts
Profit and Loss Appropriation Account
Journal entries
Interest on capital
Interest on Capital A/c Dr.To Partner’s Capital A/c
Profit and Loss Appropriation A/c Dr.To Interest on Capital A/c
SalaryPartner’s Salary A/c Dr.
To Partner’s Capital A/c
Profit And Loss Appropriation A/c Dr.To Partner’s Salary A/c
CommissionCommission A/c Dr.
To Partner’s Capital A/cProfit And Loss Appropriation A/c dr.
To Commission A/cInterest on Drawings
Partner’s Capital A/c Dr.To Interest On Drawings
Interest ON drawings A/c Dr.To profit and loss appropriation A/c
Journal Entries
Transferring part of profit to general reserve
profit and loss appropriation A/c dr.
to general reserves A/c
Distribution of profit among partners
profit and loss appropriation A/c dr.
To partner’s capital A/c