Partnership – Fundamentals

What are Past Adjustments Past adjustments refer to corrections made to the accounts of a partnership for past transactions that were not properly recorded or recognized at that time. These adjustments are necessary to reflect the true financial position and performance of the partnership. In previous classes we have studied the chapter rectification of errors. […]

What is the meaning of Guarantee of Profits When one or more partners give guarantee of minimum profits to one or more partners then this is guarantee of profits in partnership accounts. Suppose A, B and C are partners. C is given a guarantee that in any year his share of profits will never be

What is Profit and Loss Appropriation A/c Profit and Loss Appropriation Account is a nominal ledger account that records the allocation of net profit or loss among partners in a partnership firm. In a partnership, the profits or losses are distributed among partners according to the agreed terms as per the partnership agreement. Items in

Meaning of Commission to Partners There are several ways in which the profits are appropriated among the partners. Like Interest on capital, salary and commission. As a part of appropriation of profits partners may be paid commission out of profits. It is shown in the profit and Loss Appropriation A/c on the debit side. As

Meaning of Loan by firm to partner Meaning – If a partner borrows some amount from the firm for his personal expenses then such amount is treated as loan by firm to partner. Is it an Asset for firm – Yes this is an asset for the firm. It will be shown on assets side

Meaning of Loan by partner to firm Meaning – Each partner contributes Capital to the firm. If a partner gives money to the firm over and above his capital contribution then such amount is treated as a loan by partner to firm. Is it a Liability for firm – Yes this is a liability for

Meaning of Charge Against profits All the items which go to firms profit and loss A/c are charge against profits. These are called charge as these are to be paid whether the firm earns profits or incur losses. These items are deducted from the Revenue from operations (Sales) of firm to find the Net profit

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

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,