1. Introduction of Partnership Accounts – In Financial Accounting #Finance

hello dear students uh welcome to partnership accounts many people were asking me eagerly waiting for this chapter partnership account it’s one of the interesting and easy chapter if you understand the logic nothing to worry and there are many people who are requesting me to speak in

their language like hindi or telugu sorry because english is a common language which can cover the all over india even outside of the india also people are following it so i’m using english simple english easily you can understand so coming to the partnership accounts here you know that

partners who are the partners two are more than two than more than two members together when they wanted to start any kind of business with the aim of Profit when they start any kind of business that we call it as a partnership but we call all the partners as partner each and every

member in the partnership is we call them as a partner and together the organization partnership business we call it as a firm partner and firm partner means members of the partnership and firm firm firm means company or you can say business total partnership business we call it as a firm together

this partnership firm is formed in the act of 1932 1932 partnership firm has decided and it has given some rules and regulations how a partners can run the business and what are the rules and regulations we know already we have learned about this partnership business in business organization

management subject already so that link you can find it in the downside bym subject so there i i spoke about partnership in depth now anyway let me give you a small introduction what is this partnership in partnership the main features if you see will get an understanding about the partnership what

are the main features the first thing is that minimum members how many members are required for the partnership minimum two members are required and maximum is 10 members and if it is non-banking 20 members like if this members are available then they can start the business and second thing is that

agreement between the partners there must be an agreement that agreement can be oral or written agreement but always preferred to be a written agreement written agreement is always better because it’s a written proof evidence and tomorrow if any clashes comes they can get a clarification

about this everything is written so that is why agreement it’s better to be in written okay agreement is must and it is going to solve a lot of problems and it is going to work out very well without any conflicts between the partners next one is that lawful whatever business people are doing

people in the sales partners that business should be lawful unlawful illegal activities type of business no it’s not going to entertain so that’s not partnership so that will become illegal automatically so it it will be registered under the crime activities so that is why it’s a

lawful it must be lawful and all the partners are anyone who can do this business all the partners can involve in this partnership business or otherwise anyone can do the business or any two members can do the business it is their wish it is not mandatory are required all the partners has to do the

business not required anyone can do or anyone can be a sleeping partner not involved simply supplied the Capital anything can happen anything possibility is there and another thing is that unlimited library this is one of the main feature of the partnership firm and also in the

sole proprietor unlimited liability liability their liability is unlimited whenever the partnership gets into loss their liability will be always unlimited they may lose even their own property also because of the loss huge loss in the business main features are this now if you see

Capital accounts partners will be preparing their Capital accounts Capital accounts how do they prepare there are two methods to prepare the Capital account one is fixed Capital account and fluctuating

Capital account if it is a fixed Capital account we’ll be preparing two accounts one is fixed account another one is present account or we can say it as a current account fixed account if we are following fixed Capital account will have two

accounts one is fixed account let’s not use the present account we’ll use the one word that is current account fixed account and current account both accounts we are going to prepare fixed account will be fixed will write only the Capital which is supplied by the

partner that amount only will write not anything else it is fixed we don’t want any fluctuations so that is we it is fixed and whereas current account current Capital account so in current Capital account we’ll be writing all kind of transactions

related to the partners like what is the salary given to the partner what is the end rate of interest on Capital is given to the partners how much we are charging on interest and drawings like anything related to the partners transactions will write it into the current account

partners current account right so this is about fixed Capital account next one is fluctuating Capital account we have only one account this is one account only fluctuating Capital account here will write Capital and all kind of

adjustments everything comes in this account because it’s fluctuating Capital account so we need not to prepare two accounts two accounts we are going to prepare fixed Capital account if we are following fixed Capital method then we’ll

be preparing two accounts fixed account and current account fixed Capital account will say fixed current account fixed uh sorry current current Capital account will say so like we’ll be preparing two accounts any method which method we are following we must

have an id according to that we’ll open the accounts now let me tell you very important thing you know that uh Profit in loss account we have learned in the final accounts Profit and loss account why do we prepare Profit and loss account to

know the Profit or loss of the organization what do we write it in the Profit and loss account all the indirect expenses on the debit side and indirect Incomes on the Credit side expenses Incomes and the balance

which we get that we call it as a net Profit or net loss if Income is more expenses are less we get a Profit if expenses are more Income is less than we get a loss so there we are going to get net Profit or net

loss that’s Profit and loss account after preparing the Profit and loss account simultaneously immediately will be preparing Profit and loss appropriation account Profit and loss account is you know here you are going to get

net Profit net Profit on the debit side after preparing this Profit and loss account we are going to prepare Profit and loss appropriation account so this is only in partnership will prepare not in any other accounts when do we

prepare this Profit and loss appropriation account after the Profit and loss account there we got net Profit right Profit and loss account that we are transferring on the Credit side debits are there right now here

we are transferring on the Credit side with this net Profit will start the Profit and loss appropriation account are you getting it Profit and loss Profit and loss appropriation account we are preparing after the

Profit and loss required there we have net Profit so that we are transferring debit to Credit side and what else will write it in the Profit and loss appropriation account first thing is that interest on Loan uh

Loan is given by the partners to the business firm if i’m the partner if i give Loan of 1 lakh rupee to the organization then i’m eligible to get interest on Loan so that is interest on Loan how much will be the

interest on Loan generally it is said that six percent if i give one lakh rupees six percent i’ll be getting interest on Loan so that interest on Loan will be writing on the debit so whatever we are paying to the partners that comes on the

debit side interest on Loan so the that’s from the partners if interest on Loan Loan taken from banks are somewhere we don’t take only related to the partners so interest on Loan from partner that amount will write it

on debit side and also interest on Capital Capital also every partner will be distributing some amount so this Capital also will write it on the debit side how much Capital is supplied and that interest will pay so that interest

also will be writing on the debit side interest on Loan interest on Capital next salary oblique commission salary our commission also we have to pay to the partners how much salary you are paying sometimes partners may not be coming with a Capital

they won’t be distributing or they won’t be contributing the Capital so in such cases we are going to give them salary for their services that salary how much and sometimes commission on commission basis also we may take partners so what is this commission how much

commission we are giving it so that inter salary or commission will be writing on the debit side apart from the transfer of reserves see here we got net Profit out of this net Profit some amount will be transferring to the reserves that reserve if at all

transferring then that reserve will comes here if no reserve will ignore it so hardly we have four transactions on the right side one is interest on Loan interest on Capital salary or commission given to the partners and reserves that’s all debit side we have

only four transactions Credit side you know that net Profit which is transferred from debit side of Profit and loss account to here apart from that will have only one transaction interest on drawing it’s an Income for the

partnership firm we are charging interest on drawings suppose out of 10 lakh rupees of the partnership firm if any partner is drawing 10 000 rupees and 10 000 we can charge interest that is interest on drawing that is why we’ll write it on the Credit side so only one

transaction comes on the Credit side apart from the net Profit debit side we have three transactions sorry four transactions including reserves this is Profit and loss appropriation account generally Credit side will be more and

the amount the balance amount is here we call it as a net Profit net Profit transferred to partners account net Profit we are transferring to the partners account and how we have to transfer as per the uh as per the distributed ratio or as per the

part as for the Capital ratio as per the decided ratio sometimes they’ll say that three partners are there a b c they are sharing the Profits in the ratio of three is to two is to one it’s given very clearly so that Profit we are going

to distribute them at the decided rate three is to two is to one say for example Credit studies one lakh total assuming all these things comes to fifty thousand i say thirty thousand one lakh minus thirty thousand comes to seventy thousand so net Profit is here

seventy thousand seventy thousand at Profit partners are three partners in which ratio you have to give three is to two is to one so at this ratio we’ll be distributing the 70 000 how do you decide for a it is 70 000 into 3 by 6 whatever amount get it will be given to the e

and in the same way for b seventy thousand into two by six and for c seventy thousand into one by six like whatever amount get that will be given to the partners so this is Profit and loss appropriation account once if you prepare the Profit and loss appropriation

account easily we can prepare the partners Capital accounts partners Capital account it may be fixed Capital or fluctuating Capital method that we need to be very careful right now today’s class remember about

Profit and loss appropriation account you can pause the CashNews.co take a snap or otherwise you can note down the things so this is introduction of partnership accounts in the coming classes we’ll work out directly the problems will come to know exactly how do you prepare

Profit and loss appropriation account and partners Capital account whether it’s a fixed or fluctuating both the methods will see but stay connected previous subject subjects also many subjects are already taught all the links are given in the description box

many times people will be asking madam can you prepare brs brs already over bank reconciliation statement and sometimes people ask about funds flow statement that is also over sometimes people say regression analysis in the strategy that is also over like many topics already over if you want to

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going to cover so till then keep practicing well don’t lose your confidence give your best good luck