Partnership and its accounting
Partnership is association of two and more persons for getting business objectives. They make partnership deed in written form and they register their partnership in Registrar of Partnership firms. The liability of partnership is unlimited. It means if partnership firm is unable to repay the loan, then personal assets of partners can be used for repayment of loan of partnership. They have to maintain their accounts also.
There main reasons of maintaining partnership accounts
1. For division of profit or loss from partnership 2. for division of properties in case of dissolution of partnership
In partnership accounts you must open profit and loss appropriation account. It is accounts in which accountant can adjust salary, interest on capital and interest on drawing and also new division of profit or loss. So it is necessary to make this account. At the time of admission, partnership accounts can be change.
Because Capital accounts will change because, old partner sacrify for new partner so it is the duty to new partner to give some part of goodwill in cash of any other way. So that other partner can credit it in their capital accounts.
Partnership Deed
Partnership is the result of an agreement. Partnership agreement is a contract on the basis of different terms. Both parties are agree to follow the terms and conditions of this contract. This contract may be written or oral. When this contract is done in the form of written agreement, then this becomes the partnership deep. Partnership deed is the collection of all terms and conditions of written partnership agreement.