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ISC Class XII Notes 2024 : Accounts

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Yay Ig
Stanes ICSE School, Coimbatore
XII Commerce

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UNIT I: PARTNERSHIP ACCOUNTS CHAPTER-1 FUNDAMENTALS OF PARTNERSHIP Topic-1 Basics of Partnership Concepts Covered partnership-definition, features, partnership deed- contents, rules applicable in the absence of it,profit and loss appropriation account and journal entries related to it, partners capital account-its format and journal entries related to it. Revision Notes Definition of Partnership: According to Section 4 of the Indian Partnership Act, 1932, Partnership is 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. Features/Characteristics of Partnership: l Two or more persons: There must be at least two persons to form a partnership who work for a common purpose. Maximum number of partners can not be more than 50. l Agreement: There must be an agreement between two or more persons. It may be written or oral. The written agreement among the partners is known as the Partnership Deed. l Profit motive: Making profits should be the objective of the business. The partners should share the profits as well as the losses of the business. l Governing Act: Partnership business must be governed as per the rules of the Indian Partnership Act, 1932. l Lawful Business: Business should be lawful or legal in the eye of law. Partnership Deed: A document that contains the terms of agreement between the partners. Contents of Partnership Deed: l Name and Address of all partners l Name of the firm l Nature of the business l Amount of capital contributed by each partner l Drawings l Accounting period of the firm l Rate of interest on capital and interest on drawings l Profit sharing ratio l Duration of partnership, commencement of the partnership l Rights and duties of partners l Partners' salary, commission, etc. Rules applicable in the absence of Partnership Deed: l Profits and losses are to be shared equally amongst the partners. l Partners are not entitled for interest on capital invested in the firm. l No interest on drawings will be charged on amount withdrawn by partners. l Interest on partner s @ 6%. p.a. l Partners are not entitled for salary, commission and remuneration. l No new partner is to be introduced without the written consent of all the existing partners. Preparation of Profit & Loss Appropriation Account: After determination of the net profit by preparing the Profit & Loss Account, Profit & Loss Appropriation Account is prepared to show distribution of net profit among partners. It is an extension of Profit & Loss Account. Format of Profit & Loss Appropriation Account is given below:

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