Partnership : Meaning

Partnership is an association of two or more persons, the Partnership is established by an agreement either oral or in writing,  A Partnership formed for the purpose of carrying a business, it must be a legal business, Profit of the firm is share by the partners in an agreed ration, if the ratio is not agreed then equally. Profit also includes loss.

As per the Indian partnership Act, 1932, Partnership is the relation between persons and who have agreed to share the profits of a business carried on by all or any of them acting for all.The maximum number of Partners in a firm carrying an banking business should not exceed ten and  in any other business it should not exceed twenty.

Partnership Deed is a document which contains the terms and conditions of Partnership agreement either oral or written. Rules applicable in the absence of Partnership Deed that Profit sharing ratio will be equal, No Interest on Capital will be given and no interest on Drawings will be charged, No Remuneration or Salary will be paid  to the partners, Interest on Loan advanced by the partner @6% p.a will be given.

After the preparation of Profit and Loss account, entries pertaining to Interest on Capital, Drawings , Salaries among the partners are shown separately in a newly opened Profit and Loss Appropriation Account. Capital accounts of the partners are maintained either fixed capital basis or fluctuating capital basis. When the Capitals are fixed, the Current account of the partners will be maintained.

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