partnership acc

Question 1

charatertics partnership

Answer 1

1. Association of persons
2. Unlimited Liability use personal assets to settle loans
3. Agency decison based mutually
4. sleeping partner just investing no day to day

Question 2

partnership act 1890

Answer 2

 Profit and Losses will be shared equally
 No Interest On Capital
 No Interest On Drawings
 No Salary/Bonus or Commission
 Interest on Loan will be 5% per annum

Question 2

adv of partnership

Answer 2

• easy to start less rules
• workload less
• acess to knowledge expertise contacts
• more privacy not published
• partners have control
• loss shared
• more finance raised

Question 3

dis partnersip

Answer 3

• unlimited liabilty
• no independent legal status
  -hard to raise finance
• conflicts decison
• profit shared
• partner may be dishonest, lazy

Question 4

fixed capital account

Answer 4

• They are fixed and will not change due to day-to-day transactions.
• Capital Accounts will only change in case of additional capital investment or withdrawal of capital
• Current Accounts are separately maintained for day-to-day transactions.
  Interest On Capital, Interest On Drawings, Interest On Partner’s loan, Salaries Bonus or Commission and share of profits.

Question 5

floating capital acc

Answer 5

• All transactions are recorded in capital accounts including day-today transactions.
• No separate current accounts are maintained.

Question 6

goodwill

Answer 6

reputation of business which allows it to charge higher prices
brand image, prime location, number of years it has been operating, quality of products or services, skill
level of staff

Question 7

When Goodwill Is Adjusted In Partnership Books?

Answer 7

 When a new partner is admitted
 When an existing partner retires
 change in profit and loss sharing ratio or partnership agreement

Question 8

Why Goodwill Is Adjusted When A New Partner Is Admitted Or Existing Partner Retires?

Answer 8

Old partners are responsible for creation of Goodwill for business. Thus, to reward them for it by increasing
their capital.

Question 9

Why Goodwill May Not Be Recorded In Books Of Accounts?

Answer 9

1. inherent goodwill which is based on assumptions and opinions and might be inaccurate
2. Goodwill may change suddenly such as increase or decrease in reputation.
3. it will overstate the value of non-current assets which will go against prudence concept. no transaction has taken place such as takeover it will also against realization concept.

Question 10

revaluation

Answer 10

It is done to
reward existing or old partners for their efforts in building up business.

Reward will be higher amount they
can take with them in case if they retire. If there is revaluation loss, then partners will be penalized for their
actions which lead to decline in values so they will take less amount with them in case if they retire.