ACCOUNTS OF PARTNERSHIP FIRMS FUNDAMENTALS
Partnership firm is a form of organisation where two or more persons carry on some business activity on the basis of agreement among them. The persons who have agreed to carry on the partnership business are individually called ‘partners’ and collectively called as ‘firm’. The name under which the business of a firm is carried on is called the ‘firm name’. In the case of partnership, the purpose of many persons joining together may be to raise more capital, to pool expertise, to share responsibilities and liabilities, etc. Thus, to overcome the limitations of sole proprietorship such as limited capital, small size of business, etc, partnership firms are formed. The profit or loss arising from the partnership business is shared by the partners in the agreed ratio.
In India, partnership firms are governed by the Indian Partnership Act, 1932. Registration of partnership firm is not compulsory. It is optional. However, it is safer for the partnership firms to get registered so that the partners can avail the benefits of registration.