Are you looking for the complete detail of partnership deed as given in the Accounting for partnership firms – Fundamentals chapter of Class 12 Accountancy CBSE Board.
I have summed up all the detail of Partnership deed ranging from the meaning, content and importance of it.
What is the Partnership Deed
Partnership is the result of agreement among two or more persons who have agreed to share the profits of a business. Its obvious they all have agreed on some terms and conditions.
However such terms and conditions can be in oral forms. But it is assumed to be good if, all terms and conditions agreed among partners are in written format.
Such written format containing all agreed terms and conditions with necessary business information is termed as Partnership Deed.
Define Partnership Deed
“A written document which contains the terms of agreement of partnership is called Partnership Deed.”
What is the need for Partnership Deed?
In order to avoid all misunderstandings and disputes among the partners in future, It is always the best course to have a written agreement duly signed and registered under the Act.
In case of any dispute among the partners in future, this partnership deed can be furnished as evidence in court.
Other Name of Partnership Deed
It is also known as ‘Articles of Partnership’.
Content of the Partnership Deed
Following is the content of a partnership Dee. This document contain mainly all agreed terms and conditions and business information in a written document duly signed by all partners and registered.
- Description of the Partners:- Name, description and addresses of the partners.
- Description of the Firm:- Name and address of the firm.
- Principal Place of Business:- Address of the Principal place of Business.
- Nature of Business:- Nature of business that the firm shall carry on.
- Commencement of Partnership:- Date of commencement of partnership.
- Capital Contribution:- The amount of capital to be contributed by each partner, whether the Capital Accounts shall be fixed or fluctuating.
- Interest on Capital:- Rate of interest, if allowed, on capital.
- Interest on Drawings:– Rate of interest, if to be charged, on drawings.
- Profit-sharing Ratio:- Ratio in which profits or losses are to be shared by the partners.
- Interest on Loan:- Rate of interest on loan by a partner to the firm.
- remuneration to partners:- Amount of salary, commission, etc., if agreed, to be paid.
- Valuation of Goodwill:- Method by which goodwill of the firm will be valued at the time of admission or retirement of a partner or at the time of death of a partner.
- Valuation of Assets:- The manner in which assets of the firm shall be valued in the case of its reconstitution.
- Settlement of Account:- The manner in which accounts of partners shall be settled in case of his retirement or death or at the time of dissolution fo the firm.
- Accounting period:- The date on which accounts shall be closed every year. Normally accounts are closed on 31st March every year because every entity must submit the return of income on 31st March every year.
- Rights and Duties of Partners:- The rights and duties of partners are defined.
- Duration of Partnership:- The period of partnership, i.e., whether it is for a specified period or for a venture or at will.
- Bank Account Operation:- How shall the Bank Account be operated? Whether it shall be operated by any of the partners or jointly.
- Death of a Partner:- Whether the firm will continue or dissolve.
- Settlement of Disputes:- Disputes, if any, among the partners – How they shall be settled.
Importance of Partnership Deed
However, it is not essential to have a written agreement among partners. But a written agreement called partnership Deed is a legal document and can be used to settled disputes if arise in future among partners.
following are the importance of Partnership Deed.
- It governs, the rights, duties and liabilities of each partner.
- Disputes arising, if any, among the partners are resolved on the basis of partnership deed. As it is a written legal document signed by all partners and registered in the eye of law.
Is it essential to have a partnership Deed?
No, it is not essential to have a written partnership Deed. A oral agreement is enough among partners to form a partnership firm. But it is advisable to have a written agreement to avoid future disputes among partners.
As future disputes if arise, can be resolved on the basis of Partnership Deed.