Accounting for a partnership is imperative the same as is utilised for a sole proprietorship, excluding that there are more owners. In extract, a distinct account follows each partner’s allocations, investment and share of profits and losses.
As the business amplifies, one requires more capital and large number of people to regulate the trade and split its risks. In such a scenario,
- People normally adopt the partnership form of establishment. Accounting for partnership enterprises has its own attributes, as the partnership enterprise comes into being when 2 or more people come together to begin business and allocate its profits
- On several issues influencing the allocation of profits, there may not be specific accord between the partners. In such a scenario the provisions of the Indian Partnership Act 1932 is applicable
- Likewise, computation of interest on capital, maintenance of partners capital accounts and interest on drawings have their own distinctions
- These distinct scenarios require specific treatment in accounting that has to be clarified
- The treatment of scenarios like retirement of partner, admission, dissolution and death have been elucidated in the upcoming chapters
The above mentioned is the concept that is explained in detail about Accounting for Partnership : Basic Concepts for the class 12 students. To know more, stay tuned to BYJU’S.