Accounting for partnership firm Fundamentals

Need of partnership firm:-there are certain limitation of a soletrader.in a sole trading concern only one man invests capital; undertakes the risk invilved in the business and controls the whole affairs of the business.

Partnership is a relation of mutual trust and faith.in order to maintain this trust,it is necessary that the partnership accounts be maintained in an honest,accurate and equitable manner.

Essential elements of partnership:

. Two or more persons:- there must be at least two persons to form a partnership. Partnership act does not specify the maximum number of person ,but the Indian companies act,1956,restricts the number of partners to 10 for a partnership carrying on banking business and 20 in case of other kinds of business.

Agreement :-partnership is the result if an

agreement. It must come into existence and not by the operation of law.

.Existence of business and profit motive :-partnership can be formed for the propose of carrying on some

business with the intention of earning profits and such business must be legal.

. Sharing of profit :-the agreement

between the partners must be aimed at sharing the

profits of the business. if some persons join hands to run some charitable activity, it will not be called partnership.