Definition of Partnership class 12 Accountancy CBSE Board

What is the Definition of Partnership as per Class 12

Here is the simplest definition of partnership according to the syllabus of class 12 CBSE, ISC, State Board.

Definition of Partnership

The partnership is defined in Section – 4 of the India Partnership Act, of 1932 as follows:-

“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”

In other words, Partnership is a Business relationship between two or more persons to share profits of the business, carried on by all or any one of them acting for all.

Who are the Partners

The persons who have entered into partnership agreement individually are called partner

For example:- A, B, and C entered into a partnership agreement to start a partnership Business. Individually A B and C are called partners.

What is a Partnership Firm?

All partners who have entered into a partnership agreement to start a partnership business are called Partnership Firms.

For Example:- A, B, and C entered into a partnership agreement to start a partnership Business. Collectively A, B, and C would be called a Firm.

What is a Firm Name?

The name under which a Business is Carried is called Firm Name.

For Example:- A B and C start a shoe business forming a partnership firm name ‘Livsstil Shoes’. Livsstil Shoes is the Firm name.

Nature of Partnership

There are two points of view.

Business point of view:-

According to the Business point of view, Partnership Firm is a separate entity from its partners.

It means all Business transactions are recorded from the business point of view.

Note:- As per the Accounting Entity or Business Entity Principle

Legal Point of View:-

From a legal point of view, Partnership Firm is not a separate legal entity from partners.

In case of any fraudulent activity by the firm, legal action would be taken against partners, not against the firm.

Practice Questions:-

A, B, and C run a Bag Manufacturing company Named ABC Enterprises. the Firm cheated a vendor. The vendor now wants to take legal action. Whom he would register FIR against for fraud.

a) ABC enterprises

b) Partner B

c) All Partners

d) Partners A and C

Show Answer

A, B, and C run a Bag Manufacturing company Named ABC Enterprises. Partner B cheated a vendor. The vendor now wants to take legal action. Whom he would register FIR against for fraud.

a) ABC enterprises

b) Partner B

c) All Partners

d) Partner A and C

Show Answer

Under which section of the Indian Partnership Act, 1932 the definition of the partnership is mentioned.

(a) Section – 2

(b) Section – 4

(c) Section – 6

(d) Section – 11

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As per which Accounting principle the all transactions are recorded with business point of view in a partnership firm.

(a) Full Disclosure Principle

(b) Business Entity Principle

(c) Accounting Entity Principle

(d) Historical cost Principle

Show Answer

S.N	Topics
1.	Definition of Partnership
2.	Features of Partnership
3.	What are the Rights of Partners
4.	What is Partnership Deed, Meaning, content
5.	What are the Rules in the absence of a Partnership Deed
6.	What are the Rules in the absence of Partnership Deed
7.	What are the Liabilities of Partners
8.	Profit and Loss Appropriation Account format, features
9.	Journal Entries of Profit and Loss Appropriation A/c
10.	Difference between Profit and Loss A/c and Profit and Loss Appropriation A/c

S.N	Topics
11.	Difference between charge against profit and appropriation of Profit
12.	Treatment of Interest on loan by the firm to the partner
13.	Treatment of Interest on loan by the Partner to the firm
14.	Treatment of Rent paid to partner in partnership firm
15.	Accounting Treatment of Managers commission in partnership
16.	Items not shown in Profit and Loss Appropriation A/c
17.	Methods of Maintaining Partners Capital A/c
18.	Accounting Treatment When Appropriation is more than the Available Profit
19.	Difference Between Fixed Capital A/c and Fluctuating Capital A/c
20.	Difference Between Capital and Current A/c