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 .