Students can go through AP Inter 2nd Year Accountancy Notes 5th Lesson Partnership Accounts will help students in revising the entire concepts quickly.
AP Inter 2nd Year Accountancy Notes 5th Lesson Partnership Accounts
→ When two or more persons enter into an agreement to carry on business and share profits and losses is called partnership.
→ The essential features of partnership are
- There must be atleast two persons to form a partnership
- It is created by an agreement
- The agreement is to carry on legal business
- Sharing profits and losses.
→ A document which contains the terms of partnership as agreed among the partners is called partnership deed.
→ In the absence of partnership deed the following rules are applied.
a) Profit sharing ratio will be equal
b) No interest on capital and drawings
c) No remuneration or salary to the partners
d) Interest on loan advanced by the partner @ 6% p.a.
→ After preparation of Profit and Loss accounts entries relating partners interest on capital, salary commission, interest on drawings, share of profit or loss are shown separately in a newly opened profit and loss appropriation account.
→ Under fixed capital method, the capitals remains fixed, the transactions relating to interest on capital, salary, commission, drawings, interest on drawings, share of profit/ loss are shown in a separate account known as partners current account.
→ Under fluctuating capital method, all the transactions relating to partners are directly recorded in the capital account. Hence, the capital is fluctuated.