Partnership is a separate business entity. It implies that a partnership firm is different from its partners. Any action taken by the partnership firm does not bind its partners. Explain.
Partnership is a separate business entity. It implies that a partnership firm is different from its partners. Any action taken by the partnership firm does not bind its partners. Explain.
According to the accounting principle of Business Entity, sole proprietor or the owners are considered different from the business and business is considered as a separate entity from its owners. According to this principle, all the business transactions are recorded in the books from the firm’s point of view and not from the owner’s point of view. In this manner, the partners’ personal affairs and their private assets are separate from that of the firm. However, it is only as per the accounting point of view. On the legal grounds, there is no such bifurcation and partners are liable for the firm’s affairs and vice-versa. That is, all the partners are liable for all the acts of the firm done while they are partners.
According to the accounting principle of Business Entity, sole proprietor or the owners are considered different from the business and business is considered as a separate entity from its owners. According to this principle, all the business transactions are recorded in the books from the firm’s point of view and not from the owner’s point of view. In this manner, the partners’ personal affairs and their private assets are separate from that of the firm. However, it is only as per the accounting point of view. On the legal grounds, there is no such bifurcation and partners are liable for the firm’s affairs and vice-versa. That is, all the partners are liable for all the acts of the firm done while they are partners.
