CBSE Class 12 Accountancy Accounting For Partnership Firms Notes

Download CBSE Class 12 Accountancy Accounting For Partnership Firms Notes in PDF format. All Revision notes for Class 12 Accountancy have been designed as per the latest syllabus and updated chapters given in your textbook for Accountancy in Standard 12. Our teachers have designed these concept notes for the benefit of Grade 12 students. You should use these chapter wise notes for revision on daily basis. These study notes can also be used for learning each chapter and its important and difficult topics or revision just before your exams to help you get better scores in upcoming examinations, You can also use Printable notes for Class 12 Accountancy for faster revision of difficult topics and get higher rank. After reading these notes also refer to MCQ questions for Class 12 Accountancy given our website

Accounting For Partnership Firms Class 12 Accountancy Revision Notes

Class 12 Accountancy students should refer to the following concepts and notes for Accounting For Partnership Firms in standard 12. These exam notes for Grade 12 Accountancy will be very useful for upcoming class tests and examinations and help you to score good marks

Accounting For Partnership Firms Notes Class 12 Accountancy

class_12-account_concept_53.

Meaning and Definition

According to Section 4 of the 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 Firm

1) Association of two or more persons: There must be at least two persons and maximum of 50 persons to form a partnership and they must be competent to contract.

2) Partnership Agreement or Deed: There must be an agreement among partners to form a partnership. It can be written or oral.

3) Legal Business: The business of the partnership firm must be a legally allowed business.

4) Sharing of Profits or Losses: The partners must share profits or losses in a certain ratio.

5) Mutual Agency: The partners mutually take part in daily routine work or the work may be carried on by one or more partners on behalf of the other partners. Every partner is legally liable for the acts of all other partners, whether he is taking part in the activities of the firm or not.

6) Unlimited Liability: Partners' liability to the third parties is unlimited. If there are losses, and the firm is not able to pay its debts fully, then all the partners shall be jointly and severally liable to pay the debts of the firm to an unlimited extent.

Partnership Deed: The document, which contains terms of the agreement, is called' Partnership Deed'. It generally contains the details about all the aspects affecting the relationship between the partners including the objective of business, contribution of capital by each partner, ratio in which the profits and the losses will be shared by the partners and entitlement of partners to interest on capital, interest on loan, etc.


Provisions of Partnership Act, 1932 in the absence of Partnership Deed:

(a) Profit Sharing Ratio: If the partnership deed is silent about the profit sharing ratio, the profits and losses of the firm are to be shared equally by partners.

(b) Interest on Capital: No interest on capital is payable if the partnership deed is silent on the issue.
(c) Interest on Drawings: No interest is to be charged on the drawings made by the partners, if there is no mention in the Deed.

(d) Interest on Advances: If any partner has advanced some money to the firm beyond the amount of his capital for the purpose of business, he shall been titled to get an interest on the amount at the rate of 6 percent per annum.

(e) Remuneration for Firm's Work: No partner is entitled to get salary or other remuneration for taking part in the conduct of the business of the firm.


Fixed and Fluctuating Capital Accounts of Partners

There are two methods by which the capital accounts of partners can be maintained. These are:
(i) fixed capital method, and (ii) fluctuating capital method.


Fixed Capital Method:
 Under the fixed capital method, the capitals of the partners shall remain fixed unless additional capitalis introduced or a part of the capital is with drawn as per the agreement among the partners. All items likes hare of profit or loss, interest on capital, drawings,

Meaning and Definition

According to Section 4 of the 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 Firm

1) Association of two or more persons: There must be at least two persons and maximum of 50 persons to form a partnership and they must be competent to contract.

2) Partnership Agreement or Deed: There must be an agreement among partners to form a partnership. It can be written or oral.

3) Legal Business: The business of the partnership firm must be a legally allowed business.

4) Sharing of Profits or Losses: The partners must share profits or losses in a certain ratio.

5) Mutual Agency: The partners mutually take part in daily routine work or the work may be carried on by one or more partners on behalf of the other partners. Every partner is legally liable for the acts of all other partners, whether he is taking part in the activities of the firm or not.

6) Unlimited Liability: Partners' liability to the third parties is unlimited. If there are losses, and the firm is not able to pay its debts fully, then all the partners shall be jointly and severally liable to pay the debts of the firm to an unlimited extent.


Partnership Deed:
 The document, which contains terms of the agreement, is called' Partnership Deed'. It generally contains the details about all the aspects affecting the relationship between the partners including the objective of business, contribution of capital by each partner, ratio in which the profits and the losses will be shared by the partners and entitlement of partners to interest on capital, interest on loan, etc.


Provisions of Partnership Act, 1932 in the absence of Partnership Deed:

(a) Profit Sharing Ratio: If the partnership deed is silent about the profit sharing ratio, the profits and losses of the firm are to be shared equally by partners.

(b) Interest on Capital: No interest on capital is payable if the partnership deed is silent on the issue.

(c) Interest on Drawings: No interest is to be charged on the drawings made by the partners, if there is no mention in the Deed.

(d) Interest on Advances: If any partner has advanced some money to the firm beyond the amount of his capital for the purpose of business, he shall been titled to get an interest on the amount at the rate of 6 percent per annum.

(e) Remuneration for Firm's Work: No partner is entitled to get salary or other remuneration for taking part in the conduct of the business of the firm.

Fixed and Fluctuating Capital Accounts of Partners

There are two methods by which the capital accounts of partners can be maintained. These are: (i) fixed capital method, and (ii) fluctuating capital method.
Fixed Capital Method: Under the fixed capital method, the capitals of the partners shall remain fixed unless additional capitalis introduced or a part of the capital is with drawn as per the agreement among the partners. All items likes hare of profit or loss, interest on capital, drawings, interest on drawings, etc. are recorded in separate accounts, called Partner's Current Account. The partners' capital accounts will always show a credit balance, which shall remain the same (fixed) year after year unless there is any addition or withdrawal of capital. The partners' current account on the other hand, may show a debit or a credit balance. Thus under this method, two accounts are maintained for each partner viz., capital account and current account, While the partners' capital accounts shall always appear on the liabilities side in the balance sheet, the partners' current account's balance shall be shown on the liabilities side, if they have credit balance and on the assets side, if they have debit balance.

The partner's capital account and the current account under the fixed capital method would appear as shown below:

CBSE Class 12 Accountancy Accounting for Partnership Firms

Fluctuating Capital Method: Under the fluctuating capital method, only one account, i.e. capital account is maintained for each partner. All the adjustments such as share of profit and loss, interest on capital, drawings, interest on drawings, salary or commission to partners, etc. are recorded directly in the capital accounts of the partners. This makes the balance in the capital account to fluctuate from time to time. That's the reason why this method is called fluctuating capital method. In the absence of any instruction, the capital account should be prepared by this method. The proforma of capital accounts prepared under the fluctuating capital method is given below:

CBSE Class 12 Accountancy Accounting for Partnership Firms

Distribution of Profit among Partners

The profits and losses of the firm are distributed among the partners in an agreed ratio. However, if the partnership deed is silent, the firm's profits and losses are to be shared equally by all the partners.
You know that in the case of sole partnership the profit or loss, as certained by the profit and loss account is transferred to the capital account of the proprietor. In case of partnership, however, certain adjustments such as interest on drawings, interest on capital, salary to partners, and commission to partners are required to be made. For this purpose, it is customary to prepare a Profit and Loss Appropriation Account of the firm and as certain the final figure of profit and loss to be distributed among the partners, in their profit sharing ratio.


The Proforma of Profit and Loss Appropriation Account is given as follows:

CBSE Class 12 Accountancy Accounting for Partnership Firms

*Note: Interest on partner's loan is to be treated as a charge against profits.

Past Adjustments If after closing the accounts for the year it is the discovered that some errors have been committed, then these errors have to be rectified. Some adjustment entries have to be passed to rectify the error. The entries are made through Profit & Adjustment A/c. These entries are to rectify the errors committed in past, therefore, they are known as 'Past Adjustments'. Generally the following types of errors are committed:

Tags: 

 


Click to View or Download pdf file
Click for more Accountancy Study Material
*Other Important Topics
CBSE Class 12 Accountancy Syllabus
Important Formulas
CBSE Class 12 Accountancy Important Formulas
Part 1 Chapter 1 Accounting for Not for Profit Organisation
CBSE Class 12 Accountancy Accounting For Not For Profit Organisations Notes Set A
CBSE Class 12 Accountancy Accounting For Not For Profit Organisations Notes Set B
Part 1 Chapter 2 Accounting for Partnership Basic Concepts
CBSE Class 12 Accountancy Accounting For Partnership Firms Notes
CBSE Class 12 Accountancy Goodwill Nature And Valuation Notes
CBSE Class 12 Accountancy Partnership Fundamentals Notes
CBSE Class 12 Accountancy Partnership Guarantee Of Profits Notes
Part 1 Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
CBSE Class 12 Accountancy Accounting For Partnership Firms Admission Of A Partner Notes
CBSE Class 12 Accountancy Accounting For Partnership Firms Fundamentals Notes
CBSE Class 12 Accountancy Reconstitution Of Partnership Notes
Part 1 Chapter 4 Reconstitution of a Partnership Firm – Retirement/Death of a Partner
CBSE Class 12 Accountancy Retirement Or Death Of A Partner Notes
Part 1 Chapter 5 Dissolution of Partnership Firm
CBSE Class 12 Accountancy Dissolution Of A Partnership Firm Notes
Part 2 Chapter 1 Accounting for Share Capital
CBSE Class 12 Accountancy Accounting For Companies Notes
CBSE Class 12 Accountancy Accounting For Share Capital Chapter Notes
CBSE Class 12 Accountancy Accounting For Share Capital Notes
CBSE Class 12 Accountancy Implementation Of Schedule VI Of Companies Act Notes
CBSE Class 12 Accountancy Partnership Accounting For Issue Of Share Capital Notes
Part 2 Chapter 2 Issue and Redemption of Debentures
CBSE Class 12 Accountancy Accounting For Debentures Notes
CBSE Class 12 Accountancy Redemption Of Debenture Notes
Part 2 Chapter 3 Financial Statements Of a Company
CBSE Class 12 Accountancy Financial Statement Of Companies Notes
Part 2 Chapter 4 Analysis of Financial Statements
CBSE Class 12 Accountancy Analysis Of Financial Statements Notes
CBSE Class 12 Accountancy Partnership Common Size And Comparative Statements Notes
Part 2 Chapter 5 Accounting Ratios
CBSE Class 12 Accountancy Accounting Ratios
CBSE Class 12 Accountancy Partnership Ratio Analysis Chapter Notes
CBSE Class 12 Accountancy Partnership Ratio Analysis Notes
Part 2 Chapter 6 Cash Flow Statement
CBSE Class 12 Accountancy Cash Flow Statement Notes Set A
CBSE Class 12 Accountancy Cash Flow Statement Notes Set B
CBSE Class 12 Accountancy Partnership Cash Flow Statement Notes

Latest NCERT & CBSE News

Read the latest news and announcements from NCERT and CBSE below. Important updates relating to your studies which will help you to keep yourself updated with latest happenings in school level education. Keep yourself updated with all latest news and also read articles from teachers which will help you to improve your studies, increase motivation level and promote faster learning

CBSE Class 10 Revised Syllabus

Last year CBSE had to reduce the syllabus because of the pandemic situation but it was not very effective because there were no examinations. This year to avoid any confusion and conflict, CBSE has decided to reduce the syllabus into term 1 and term 2. 50 percent of...

CBSE Reading Challenge

The acquisition of 21st century competencies of communication, critical and creative thinking and the ability to locate, understand and reflect on various kinds of information has become more crucial for our learners. It is well accepted that Reading Literacy is not...

CBSE OMR Sheet Guidelines for Term 1

You are aware that the CBSE will be using OMR for the first time for assessment of both the Classes-X and XII in Term-I examinations. Hence, there is a need that all the students appearing in the Term-l examinations and the schools sponsoring these students should have...

×
Studies Today