Meaning of Capital Meaning – In simplest terms , Capital means the amount that a person invests in business. This investment can be in any form be it cash or kind (Machinery, building, vehicle, stock, etc.).Considering that the business is a separate entity in accounting sese , the capital invested by the owner also becomes […]
Partner Capital A/c Read More »
What is drawings in Partnership Accounts Drawings means any amount withdrawn , either in cash or kind, by partners for personal use from the firm. Usually we think that drawings is done only in cash. But this is not correct. Drawings can be done in the form of any asset like cash, machine, vehicle, computer,
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What is Interest on Capital Meaning – Interest on Capital is an appropriation of profits in case of partnership. It is a way to compensate more the partners who have contributed more capital compared to other partners. Since it is an appropriation so it is neither a profit nor loss for the firm. The key
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Meaning of Partnership A partnership is an association between two or more persons who agree to do business and share profits and losses of the business Features of Partnership Who is a Person Two or More persons – At least 2 persons are required to form a partnership. A single person alone cannot form partnership.
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What is Partnership Partnership is an association between two or more persons who agree to do business and share profits and losses What is Partnership Deed It is pertinent to note that the partnership can be formed either by an oral or a written agreement among the partners. Partnership Deed is a written document which
Provisions applicable in the absence of partnership Deed Read More »
Original Cost of Asset This is the cost of the asset. It is also known as historical cost. It includes : Example – Below cost details are with regard to purchase of a machinery : Note : Any refundable taxes are not included in the cost Estimated Residual Value or Scrap value Amount estimated to
Factors in Depreciation calculation Read More »
Show true and fair view of financial statements Financial Statements are made on historical cost basis. It means that the transactions are recorded in books of accounts at purchase price. In case of assets however the value of assets is reduced due to usage or passage of time continuously. So it is right to reduce
Objectives for providing depreciation Read More »
Depreciation is the reduction in the value of an asset due to : Depreciation can be used both in the practical sense and in accounting sense. In practical sense the reduction happens in the market value of an asset you own like mobile phone, laptop, car, furniture, washing machine, TV, etc. whose value reduces as
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The retiring partner is entitled to his share in firms Goodwill as he has also put in efforts in the formation of firm’s Goodwill. The retiring partner is paid back his share in the assets of the firm. Goodwill is also an asset for the firm. So retiring partner is paid his share from Goodwill
Goodwill Accounting on retirement of a partner Read More »
Description Gaining Ratio Sacrificing Ratio Formula for calculation New profit Sharing Ratio Less Old Profit Sharing ratio Old profit sharing Ratio Less New profit Sharing Ratio When calculated a) Retirement of a Partner b) Change in profit sharing ratio among existing partners a) Admission of a partner b) Change in profit sharing ratio among existing
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