CONTENTS:
- Meaning of partnership
- Partnership agreement
- Accounting entries
DEFINITION OF PARTNERSHIP
The partnership Act of 1890 defined partnership as ‘the relation which exists between persons carrying on a business in common with a view of profit’.
Partnership can be formed by two to twenty persons. The owners of partnership business are called partners.
Partnership Agreement
This refers to rules and regulations put in place by the partners for smooth operation of the partnership business. The guiding rules will be contained in a written agreement known as partnership deed. The agreement must be signed by the partners in the presence of a lawyer.
CONTENTS OF PARTNERSHIP AGREEMENT
- The capital to be contributed by each partner.
- The rate of interest on capital.
- The rate of interest on drawings.
- The division of profits and losses.
- Partners’ salaries, commissions and other remunerations.
- Valuation of goodwill on the death or retirement of a partner.
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