Introduction to Partnership Firm for Uttarakhand PSC 2019

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Introduction to Partnership Firm: Accounting Commerce - (Commerce)

  • Partnership is one of the important forms of business organisations.

    • It is an association of two or more persons

    • competent to enter into a contract, making agreements,

    • contribute capital,

    • undertaking a lawful business for earning profit and

    • sharing the same in an agreed proportion.

  • Partnership is a trading organisation, which results from a contract and hence is governed by the Indian Partnership Act, 1932 as well as the Indian Contract Act, 1872.

  • When two or more persons come together to carry on a business with a view to share profits or losses, such a relationship is called as ‘Partnership’.

Image of Partnership

Image of Partnership

Image of Partnership

Why was a “Partnership” needed at all?

Image of Partnership

Image of Partnership

Image of Partnership

  • Sole proprietorship suffers from limited resources, hasty decisions and temporary existence etc. As remedy, partnership emerged as a form of business organization.

  • It is an extension of a sole proprietorship. It is better than sole proprietorship because in sole proprietorship the business is carried out by the individual with limited capital and limited skill.

  • Due to the limited resources of a single individual carrying a sole proprietorship, a larger business requiring more resources and investment than available to the sole proprietor cannot be thought of such business.

  • On the other hand, in partnership, a number of partners join together with their capital to form an agreement and carry out a business jointly.

Definition of Partnership Firm

According to Section 4 of the Partnership Act, 1932 -

  • “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all”.

  • Prof. Haney defines partnership as, “the relation existing between persons competent to make contract who agree to carry on a lawful business in common with a view to earn private gain.”

Examples:

  • A and B buy 100 tons of oil which they agree to sell for their joint account.

    This forms a partnership and A and B are considered as partners.

  • A and B buy 100 tons of oil and agreed to share it among them.

  • It does not form a partnership as they have no intention to carry out business.

Essentials of a Partnership

Image of Essentials of A Partnership

Image of Essentials of a Partnership

Image of Essentials of A Partnership

  • There must exist an agreement between the partners.

  • The motive is to earn the profit and share between the partners.

  • The agreement must be to carry out the business jointly or by any of them acting on the behalf of all.

Types of Partners

Image of Types of Partners

Image of Types of Partners

Image of Types of Partners

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