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Presentation 1
Presentation 1
DEFINITION:ACCORDING TO SECTION 4 OF THE INDIAN PARTNERSHIP ACT , 1932, Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
FEATURES OF PARTNERSHIP
1. 2. 3. 4. 5. 6. Association of 2 or more persons Agreement Carrying on a business Lawful business Profit sharing Business can be carried on by all or any of the partner acting for all.
RIGHTS OF PARTNERS
1.
Every partner has a right to take part in the management of the business To be consulted about the affairs of the partnership business To inspect the books of account and have a copy of the same to share the profits or losses with others in the agreed ratio
If a partner has contributed a sum in excess of the agreed capital, he has a right to receive interest on such an excess at an agreed rate of interest
2.
3. In case the rate of interest is not agreed , he may be paid interest at @ 6%p.a. 4. In case of an emergency , a partner has the right to at according to his best judgement. 5. A partner has the right not to allow the admission pf new partner. 6. On giving a proper notice, a partner has the right to retire from the firm.
DUTIES OF PARTNERS
1. 2. 3. 4. 5. 6. To devote time and attention to the business of the partnership, To carry on the business diligently and with the greatest common advantages. Not to engage in competition against the fire . If he does so, he must account for the profits made in the competing business. To hold and use the property of the firm only for the firm. To act within the authority. To make good the loss that may have been caused by his willful neglect or breach of trust
PARTNERSHIP DEED
The document in writing containing the important terms of partnership as agreed by the partners between themselves is called the deed of partnership. It should be properly drafted and stamped according to the provision of the stamp act.
CONTANTS OF THE DEED:1. Description of the partners. 2. Description of the firm. 3. Principal place of business. 4. Nature of business. 5. Commencement of partnership. 6. Capital contribution. 7. Interest on capital. 8. Interest on drawings 9. Profit sharing ratio. 10. Interest on loan. 11. Salary
12. Goodwill. 13. Valuation of loan. 14. Settlement of account. 15. Settlement of accounts in case of dissolution of firm. 16. Accounting period. 17. Rights and duties of partners. 18. Duration of partnership. 19. Bank operation. 20. Settlement of disputes.
And if the amount withdraw by the partners in the middle of the year than the formula is:
2. When interest is charge as per the partnership deed than it is provided at the rate of interest.
2.
1.
STEPS:-
Calculate the amount already credited by way of interest on capital, share of commission, salary etc.
2.
Calculate the amount which should have been credited by way of salary, interest on capital, commission, share of profit, etc
Calculate the different between the amounts calculated as per step 1 and the amount calculated as per step 2.
3.
4.
Find out the partner who received excess and the partner who received short.
Pass the Adjusting Journal Entry by debiting the Capital Account of partner who received excess and by crediting the Capital Account of partners who received short
5.
GUARANTEE OF PROFIT
1. Guarantee by the firm to a partner. 2. Guarantee by the partner to a partner. 3. Guarantee by the partner to firm. 4. Simultaneous guarantee by the firm to a partner and by the partner and to firm.
PARTNERSHIPADMISSION
When a partner joints the existing firm , it is known as his admission in partnership. Generally in the following condition new partner enter in the firm:1. In case of more capital needed 2. Requirment of efficient person 3. Requirement of influenced person 4. In case of large area and scope of business.
ACCOUNTING TREATMENT
1. 2. 3. 4. Capital settlement of new partner. Settlement of new profit sharing ratio. Calculation of goodwill. Revaluation of assests and liabilities.
SACRIFICING RATIO
Ratio of sacrifices made by the old partners is termed as sacrificing ratio.It is always between old partners. Case1 :- when share of new partner is given without giving the details of the sacrifice made by old partners.
Case2:- when old ratio of the old partners and new ratio of all the partners is given
GOODWILL
Goodwill is nothing more than the probability that the old customers will resort to the old place. - Lord Eldon
CHARACTERISTICS OF GOODWILL:1. 2. 3. 4. 5. 6.
Intangible asset No individual existence Dependent on the subjective judgment Fluctuates with the changes in fortunes Earning higher profits Existence due to various factors
CAPITALISATION METHOD
According to this method goodwill can be calculated in 2 ways: By capitalising of average profit
HIDDEN GOODWILL
STEPS:Ascertaining the total capital (based on combined capital of old and new partners). CAPITAL = ASSETS LIABILITIES
1.
2. Calculating the total capital of the new firm (Based on new partners capital) 3. Calculation of goodwill