ZeePedia buy college essays online


Advanced Financial Accounting

<<< Previous ESSENTIALS OF PARTNERSHIP Next >>>
 
img
Advance Financial Accounting (FIN-611)
VU
LESSON # 18
ESSENTIALS OF PARTNERSHIP
The law governing partnership is contained in the Partnership Act, 1932. Section 4 of
the Act defines partnership as "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".
The following are the essential elements of partnership:
1. There must be an agreement entered into by all the persons concerned.
2. The agreement must be to share the profits of a business.
3. The business must be carried on by all or any of them acting for all.
All these elements must be present before a partnership can come into existence. If any of them
is not present, there cannot be formed a partnership.
Partnership agreement
Partnership is the result of an agreement. The agreement among the partners that sets
out the terms on which they have agreed to form a partnership is called partnership
agreement. It may be in writing or by words of mouth or be implied from the course of
conduct of the parties. It is desirable to have the partnership agreement in writing to
avoid future disputes. The document in writing containing the various terms and
conditions as to the relationship of the partners to each other is called the `partnership
deed'. The following clauses are normally included in partnership agreement.
1.
Name under which business of the firm is to be carried on.
2.
Nature of partnership business.
3.
The capital of the firm and the proportion in which it is to be contributed by
each partner.
4.
Ratio in which profits and losses are to be shared by partners.
5.
Rate at which interest is to be allowed on the capital and charged on the
drawings.
6.
Amount, which each partner is allowed to withdraw in anticipation of,
profits from the business for private expenses and the timing of such
drawings.
7.
Amount of salaries and other allowances if any payable to partners.
8.
Commencement and duration of partnership.
9.
Whether the capital accounts are to be fixed or fluctuating.
10.
Valuation of goodwill at the time of retirement or death of a partner.
11.
The method of ascertaining the amount due to the retiring partner or the
representative of a deceased partner at the time of retirement or death and
the manner in which the amount due will be paid.
12.
Keeping of proper books of accounts and preparation of balance sheet.
13.
Audit of the accounts of the firm and the manner of appointment of auditor.
14.
Right and duties of partners.
15.
Arbitration clause, laying down the procedure to be followed for the
settlement of disputes among the partners.
84
img
Advance Financial Accounting (FIN-611)
VU
Question
X, Y and Z set up a partnership firm on 1-1-2005. They contributed Rs. 150,000, Rs.
120,000 and Rs. 90,000 respectively as their Capitals and decided to share Profit & Loss
in the ratio of 3: 2: 1.
The partnership deed provides that A is to be paid a salary of Rs. 3,000 per month and
B a commission of Rs. 15,000. It also provides that interest on Capital be allowed at 6%
per annum. The drawings and Interest on drawings for the year were as follows:
Partners
Drawings (Rs.)
Interest on drawings
(Rs.)
A
18,000
810
B
12,000
540
C
6,000
270
The Net amount of Profit as per Profit & Loss account for the year 2005 was Rs.
106,980.
Required:
You are required to prepare a Profit & Loss Appropriation Account and Partner's
Capital Account after passing necessary Journal entries.
85
Table of Contents:
  1. ACCOUNTING FOR INCOMPLETE RECORDS
  2. PRACTICING ACCOUNTING FOR INCOMPLETE RECORDS
  3. CONVERSION OF SINGLE ENTRY IN DOUBLE ENTRY ACCOUNTING SYSTEM
  4. SINGLE ENTRY CALCULATION OF MISSING INFORMATION
  5. SINGLE ENTRY CALCULATION OF MARKUP AND MARGIN
  6. ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
  7. NON-PROFIT ORGANIZATIONS
  8. PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS
  9. DEPARTMENTAL ACCOUNTS 1
  10. DEPARTMENTAL ACCOUNTS 2
  11. BRANCH ACCOUNTING SYSTEMS
  12. BRANCH ACCOUNTING
  13. BRANCH ACCOUNTING - STOCK AND DEBTOR SYSTEM
  14. STOCK AND DEBTORS SYSTEM
  15. INDEPENDENT BRANCH
  16. BRANCH ACCOUNTING 1
  17. BRANCH ACCOUNTING 2
  18. ESSENTIALS OF PARTNERSHIP
  19. Partnership Accounts Changes in partnership firm
  20. COMPANY ACCOUNTS 1
  21. COMPANY ACCOUNTS 2
  22. Problems Solving
  23. COMPANY ACCOUNTS
  24. RETURNS ON FINANCIAL SOURCES
  25. IASBíS FRAMEWORK
  26. ELEMENTS OF FINANCIAL STATEMENTS
  27. EVENTS AFTER THE BALANCE SHEET DATE
  28. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
  29. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 1
  30. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 2
  31. BORROWING COST
  32. EXCESS OF THE CARRYING AMOUNT OF THE QUALIFYING ASSET OVER RECOVERABLE AMOUNT
  33. EARNINGS PER SHARE
  34. Earnings per Share
  35. DILUTED EARNINGS PER SHARE
  36. GROUP ACCOUNTS
  37. Pre-acquisition Reserves
  38. GROUP ACCOUNTS: Minority Interest
  39. GROUP ACCOUNTS: Inter Company Trading (P to S)
  40. GROUP ACCOUNTS: Fair Value Adjustments
  41. GROUP ACCOUNTS: Pre-acquistion Profits, Dividends
  42. GROUP ACCOUNTS: Profit & Loss
  43. GROUP ACCOUNTS: Minority Interest, Inter Co.
  44. GROUP ACCOUNTS: Inter Co. Trading (when there is unrealized profit)
  45. Comprehensive Workings in Group Accounts Consolidated Balance Sheet