Section 4 of the Indian Partnership Act, 1932, defines partership as follows:
"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."
Partnership
Features or characteristics of Partnership
1.Association of two or more persons.
Partnership is an association of two or more persons agreeing to carry on business and share profit or loss. Section 11 of the Companies Act,1956 however, limits the number of partners that can carry on business of banking to ten and in any other case to twenty. It means a firm having more than ten partners cannot carry on a business of banking. Similarly, a firm having more than twenty partners can not carry on any business.
2.Agreement.
The partnership comes into existence by an agreement,either written or implied, and not by the status or process of law as in the joint family business. This agreement among the partners is the basis of their relationship which may be for a particular venture, for a final period or at will. It is to be noted that under the Income Tax Act, partnership should be written.
3.Carrying on a business.
Agreement should be for the purpose of carrying on a business.
4.Lawful Business.
The business for which partnership is formed must be legal.
5.Profit-sharing.The agreement between the partners must be to share the profits(or losses). It is not essential that all the partners must be to share the losses also. There may be a provision in the partnership deed that a particular partner or partners shall not bear losses. The profit is arrived at after providing for salaries to partners and interest on capital, if agreed and stated in the agreement. An agreement entered into by individuals for a charitable purpose will not be treated as a partnership. It is so because the association is not to carry on business.
6.Business can be carried on by all or any of the partner acting for all.
The business of partership can be carried on by all the partners or by any one of the partners acting as agent of the other partners. In other words, partners are agents as well as principals. It must, however, be understood that even if a partner does not participate in the management he will not be absolved from the liabilities as a partner. It is so because he is bound by the acts of other partners.
The essential elements of a partnership flowing from above definition are:A number of buisness enterprises are owned by partnership firms and companies and thus, accounting of such enterprises assumes special significance. There are certain peculiarities in the accounts of partnership firms than those of sole proprietorship firms. The main peculiarity regarding the accounting of partnership firm, for example, relates to the distribution of profits, the maintenance of the capital accounts, etc. In this chapter, we shall discuss the fundamentals of accounting of partnership firms.
The persons who have entered into a partnership with one another are individually called 'Partners' and collectively a 'firm'.The name under which the business is carried on is called 'firm name'.
"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."
Partnership
Features or characteristics of Partnership
1.Association of two or more persons.
Partnership is an association of two or more persons agreeing to carry on business and share profit or loss. Section 11 of the Companies Act,1956 however, limits the number of partners that can carry on business of banking to ten and in any other case to twenty. It means a firm having more than ten partners cannot carry on a business of banking. Similarly, a firm having more than twenty partners can not carry on any business.
2.Agreement.
The partnership comes into existence by an agreement,either written or implied, and not by the status or process of law as in the joint family business. This agreement among the partners is the basis of their relationship which may be for a particular venture, for a final period or at will. It is to be noted that under the Income Tax Act, partnership should be written.
3.Carrying on a business.
Agreement should be for the purpose of carrying on a business.
4.Lawful Business.
The business for which partnership is formed must be legal.
5.Profit-sharing.The agreement between the partners must be to share the profits(or losses). It is not essential that all the partners must be to share the losses also. There may be a provision in the partnership deed that a particular partner or partners shall not bear losses. The profit is arrived at after providing for salaries to partners and interest on capital, if agreed and stated in the agreement. An agreement entered into by individuals for a charitable purpose will not be treated as a partnership. It is so because the association is not to carry on business.
6.Business can be carried on by all or any of the partner acting for all.
The business of partership can be carried on by all the partners or by any one of the partners acting as agent of the other partners. In other words, partners are agents as well as principals. It must, however, be understood that even if a partner does not participate in the management he will not be absolved from the liabilities as a partner. It is so because he is bound by the acts of other partners.
The essential elements of a partnership flowing from above definition are:A number of buisness enterprises are owned by partnership firms and companies and thus, accounting of such enterprises assumes special significance. There are certain peculiarities in the accounts of partnership firms than those of sole proprietorship firms. The main peculiarity regarding the accounting of partnership firm, for example, relates to the distribution of profits, the maintenance of the capital accounts, etc. In this chapter, we shall discuss the fundamentals of accounting of partnership firms.
The persons who have entered into a partnership with one another are individually called 'Partners' and collectively a 'firm'.The name under which the business is carried on is called 'firm name'.
