ppt on Partnership firm process and procedure

Features of a partnership firm and need of partnership deed and dissolution of a partnership firm ppt
Dr.NishaGupta Profile Pic
Published Date:25-07-2017
Your Website URL(Optional)
CPT Fundamentals of Accounting: Chapter 8 – Unit 1 CA. V.K. Jain Features of a partnership firm and need of partnership deed Points to be covered in a partnership deed Technique of maintaining P & L Appropriation Account Methods of maintaining partners capital accounts, namely fixed and fluctuating Partners capital and current accounts Treatment of Interest on Capital and Drawings, Salaries / Commission / Bonus / Remuneration etc. to partners Indian partnership act – “the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all” Essential features: Association of two or more persons Agreement - verbal/oral or in writing Existence of business – legal- recognition in the eyes of law Carrying of business by all of them or any of them acting for all Sharing of profits Unlimited liability Sharing of profits – not necessarily losses Mutual agreement Relationship - principal and agent Persons entered into partnership with one another are individually called partners and collectively a firm Name under which business of the firm is carried on is called firm name Maximum limit of partners: • Indian Partnership Act 1932 is silent on this issue • According to Companies Act 1956, maximum limit of partners for a Banking Company is 10 and of other is 20. A partnership firm becomes illegal if number of partners exceeds the said limit Document contains terms and conditions as agreed among the partners Relationship of partners is governed by mutual agreement. Agreement may be oral or in writing. Partnership deed is not compulsory . When agreement is in writing, it is known as partnership deed . It should be properly stamped, registered and comprehensive in detail so as to avoid disputes later on. If deed contains a clause, it will hold good, otherwise provisions of Indian Partnership Act 1932 will be applicable Name of the firm Name and address of all partners Nature and place of business Duration of partnership Date of commencement of partnership Capital to be contributed by each partner Drawings, timings of drawings etc. Interest on capital, drawings and loans by partners Profit / loss sharing ratio Salary / remuneration / bonus etc. to partner Method of valuation of goodwill Procedure of retirement and method of settlement of accounts Treatment of losses due to insolvency of a partner Procedure of settlement of disputes Preparation of accounts and their audit Note : deed must not contain any term which is in contravention with the provisions of Indian Partnership Act Terms laid down in deed may be varied with the consent of all partners Indian Partnership Act 1932 applies which provides - No salary to any partner No interest on capital No interest on drawings Interest on loan by partner to the firm 6% p.a. Profit / loss sharing ratio will be equal No new partner can be admitted without the consent of all the partners In the absence of an agreement to the contrary – interest on partners capital and salary to partners can be paid only out of profits i.e., it is an appropriation of profits. If no profits are there then no salary or interest on capital can be allowed to partners. In case of inadequacy of profits – first calculate salary and interest on capital as usual and then distribute profits in this ratio. Buying and selling of goods Receiving payments on behalf of the firm and give a valid receipt Drawing cheques , and drawing ,accepting and endorsing Bills of Exchange and Promissory Notes in the name of the firm Borrowing money with or without pledging stock-in-trade Engaging servants for business Submitting a dispute to arbitration Opening a bank account on behalf of the firm in own name Compromise or relinquish any claim by the firm Withdrawal of a suit or proceeding filed on behalf of firm Admit any liability in a suit or proceedings against the firm Acquisition of immovable property belonging to the firm Entering into partnership on behalf of the firm Registration of firm is optional and not compulsory If firm is not registered – no suit can be filed by firm or partners but a third party can file a suit against unregistered firm or it’s partners With the consent of all partners a minor may be admitted to the benefits of partnership A person may be admitted or retired as a partner with the consent of all (including himself) or in accordance with an express agreement among the partners A firm is dissolved on the death of a partner unless otherwise agreed Not much difference between partnership firm and proprietorship accounts. Instead of one capital account there will be as many as there are partners. The partners capital accounts may be maintained in two ways: Fixed capital method and Fluctuating capital method Two accounts i.e; Capital and current account for each partner Transactions relating to introduction or withdrawal of capital are recorded in capital account Other transactions like interest on capital, drawings, salary, commission, share of profits / loss and other adjustments are recorded in current account Capital account will always have credit balance To Cash / bank By Balance b/f (withdrawal of capital) To Balance c/f By Cash / Bank (additional capital) Only one account viz. capital account for each partner All transactions relating to partner are recorded in his capital account. As a result balance keeps on fluctuating particulars Amount particulars Amount To Balance b/f By Balance b/f To Bank (drawings) By Interest on capital To Interest on drawings By Salary / Commission To Profit & loss a/c By Profit & loss a/c (share of loss) (share of profit) To Balance c/f By Bbalance c/f Basis of distinction Fixed capital method Fluctuating capital method Change in capital Normally unchanged Fluctuates quite except under special frequently from period to circumstances period No. of accounts Two – fixed capital and Only one maintained current accounts Capital account Adjustments for drawings, In current account In capital account interest on drawings, interest on capital, salary, share of profit / loss Can capital have negative never Can have balance Interest on capital and salary / bonus / commission / remuneration to partner is an appropriation of profit. It means it can not be provided in the absence of profits or unless there is an express agreement in partnership deed for that It is merely an extension of Profit & Loss A/c It is credited with net profit and interest on drawings It is debited with interest on capital, salary / bonus / commission / remuneration to partner Balance is transferred to Capital or Current accounts as the case may be in profit sharing ratio

Advise: Why You Wasting Money in Costly SEO Tools, Use World's Best Free SEO Tool Ubersuggest.