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Nature
/ Characteristics of Partnershp
Partnership Deed - Meaning
and Impact
Contents of the Partnership
Deed
Special Aspects of Financial
Accounts of Partnership
1. Fixed and Fluctuating
Capitals
2. Division of profit among
partners
3. Past adjustments
4. Guarantee of profits
5. Accounting for joint life
policy
Miscellaneous adjustments
Additional illustrations
Theory questions
Numerical questions
Chapter Introduction
A partnership firm is a business jointly owned by two or more
persons. Partnership is defined by Indian Partnership Act of
1932 as “the relation between persons who have agreed to share
profits of a business carried on by all or any one of them
acting for all”. This definition highlights the following
features of a partnership business.
i) A partnership involves two or more persons.
ii) It is formed on the basis of an agreement.
iii) It is formed for conducting a business.
iv) Profit or loss arising from the business will be shared by
the partners.
v) It may be run by all the partners or any one of the partners
representing all of them.
Accounting for partnership involves several special adjustments
due to the presence of more than one owner. It should safeguard
the rights of partners and it should establish liabilities of
partners in an impartial manner. Any error in accounting
decision will result in undue advantage to some partners at the
expense of others. This problem does not arise in a sole trading
business since there is only one owner, whose decisions, whether
they are right or wrong would affect only his own interest.
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