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    Accounting 31

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    Tooba Mansoor
    A partnership is a formal business arrangement where two or more individuals agree to form an organization to advance their interests and share profits and losses. Key features of a partnership include having between 2-10 partners, an agreement to carry out business either explicitly or implicitly, and sharing of profits and losses according to agreed percentages. Accounting for partnerships is similar to sole proprietorships and includes financial statements and cost statements. Partners' equity is influenced by investments, withdrawals, and profits/losses, requiring separate capital and drawing accounts for each partner to track changes in equity. Net income or loss is distributed among the partners.

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    Accounting 31

    Uploaded by

    Tooba Mansoor
    18 views2 pages
    A partnership is a formal business arrangement where two or more individuals agree to form an organization to advance their interests and share profits and losses. Key features of a partnership include having between 2-10 partners, an agreement to carry out business either explicitly or implicitly, and sharing of profits and losses according to agreed percentages. Accounting for partnerships is similar to sole proprietorships and includes financial statements and cost statements. Partners' equity is influenced by investments, withdrawals, and profits/losses, requiring separate capital and drawing accounts for each partner to track changes in equity. Net income or loss is distributed among the partners.

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    A partnership is a formal business arrangement where two or more individuals agree to form an organization to advance their interests and share profits and losses. Key features of a partnership include having between 2-10 partners, an agreement to carry out business either explicitly or implicitly, and sharing of profits and losses according to agreed percentages. Accounting for partnerships is similar to sole proprietorships and includes financial statements and cost statements. Partners' equity is influenced by investments, withdrawals, and profits/losses, requiring separate capital and drawing accounts for each partner to track changes in equity. Net income or loss is distributed among the partners.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    18 views2 pages

    Accounting 31

    Uploaded by

    Tooba Mansoor
    A partnership is a formal business arrangement where two or more individuals agree to form an organization to advance their interests and share profits and losses. Key features of a partnership include having between 2-10 partners, an agreement to carry out business either explicitly or implicitly, and sharing of profits and losses according to agreed percentages. Accounting for partnerships is similar to sole proprietorships and includes financial statements and cost statements. Partners' equity is influenced by investments, withdrawals, and profits/losses, requiring separate capital and drawing accounts for each partner to track changes in equity. Net income or loss is distributed among the partners.

    Copyright:

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    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Partnership:

    A partnership is the formal business arrangement where different individuals or institutions

    agree to form an organization in which they would advance their interests. In the most frequent

    instances, partnership is incorporated between two or more people called themselves general partners

    to achieve and share profits and losses. According to the partnership act 1890, it describes partnership

    as the association that exits among the individuals who are willing to carrying the business in a common

    view of earning profits. However, at times individuals have come into the informal agreement but fulfill

    the requirement of the law then they would be considered as the partners whether they intend it or

    not. So it is really important for the individuals that they should understand the requirements and rights

    and obligations in the beginning, if they are considering setting up the partnership firm.

    Some basic features of partnership:

     In partnership, the group of people forming the partnership lies between two to ten.

     There has to be an agreement in order to carry out the business. This agreement can either be

    implicit or explicit.

     Profit or loss would be shared among the partners as per the agreed percentages.

    Accounting procedures:

    Accounting processes of partnership are similar to the sole proprietorship. That includes,

    financial statements, cost statements etc. some of the most common accounting practices found in

    the partnership are explained below.


    Owner’s equity account:

    Equity of the partnership is continuously influenced by their investments, withdrawals and profit or

    loss. Due to this very reason there are two accounting ledgers are maintained i.e. partner’s capital and

    partners drawing account.

    Partners capital account is utilized for the purpose of recording the permanent changes take place in

    the partner’s equity. They include initial investment, further investments, or the withdrawal of the

    investment from the business. However, partner’s drawing account is responsible for keeping the

    records of the temporary changes in the partners equity which caused by the withdrawal of cash from

    the business for personal use etc.

    Accounting for net income/ loss:

    The other element which separates the accounting of partnership from the sole proprietorship

    is the distribution of net loss or profit among the partners.

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