Accounting for Partnership Firms TS Grewal Solutions: Class 12 [CBSE]

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BookTS Grewal Accountancy
Class12
Chapter2 – Accounting for Partnership Firms- Fundamentals
Volume1

TS Grewal Class 12 Solutions Chapter 2

TS Grewal Class 12 Solutions Chapter 1
TS Grewal Class 12 Solutions Chapter 1
TS Grewal Class 12 Solutions Chapter 1
TS Grewal Class 12 Solutions Chapter 1
TS Grewal Class 12 Solutions Chapter 1
TS Grewal Class 12 Solutions Chapter 1
TS Grewal Class 12 Solutions Chapter 1
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2
TS Grewal Class 12 Solutions Chapter 2

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TS Grewal Class 12 Chapter 2 – Accounting for Partnership Firms- Fundamentals

In this chapter, we dive deep into the world of partnership accounting. Partnership refers to an agreement between two or more individuals who decide to carry on business collectively and share profits and losses. It’s fundamental to understand the intricacies of accounting for such ventures, especially for class 12 students, as it sets the foundation for advanced accounting concepts.

Nature of Partnership

According to the Indian Partnership Act of 1932, a partnership is “the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The essential features of a partnership include:

  • Mutual Consent: Partners join by choice and can decide the terms of their partnership.
  • Shared Profits and Losses: They share profits and losses as per the agreed ratio or equally in the absence of an agreement.
  • Unlimited Liability: Each partner can be held responsible for the firm’s debts.
  • Principal-Agent Relationship: Every partner is both an agent and a principal for the other partners.

Partnership Deed

This is a document that lays down the terms of the partnership. It typically includes:

  • Name and Address: Of the firm and all partners.
  • Nature of Business: The type of business they’re engaging in.
  • Duration of Business: Whether it’s for a specified period or at-will.
  • Capital Contribution: How much each partner contributes.
  • Profit/Loss Sharing Ratio: The agreed upon ratio to divide profits or losses.
  • Interest on Capital and Drawings: Any interest to be paid on the capital contributed or drawings made.
  • Salaries or Commissions: Payable to partners.
  • Rules for Admission, Retirement, or Death: Of a partner.

In the absence of a deed, provisions of the Indian Partnership Act, 1932 apply.

Fixed and Fluctuating Capital Accounts

  • Fixed Capital Account: Capital remains unchanged unless there’s mutual agreement. Partners maintain two accounts – Capital Account (shows initial capital and any additional capital introduced) and Current Account (reflects interest on capital, share of profit/loss, drawings, etc.).
  • Fluctuating Capital Account: Only one account is maintained. Capital changes due to regular business operations.

Formula: Closing Capital = Opening Capital + Net Profit (or – Net Loss) – Drawings + Additional Capital Introduced

Example: If A’s opening capital was Rs.50,000, net profit shared was Rs.10,000, and he withdrew Rs.5,000 during the year, his closing capital = Rs.50,000 + Rs.10,000 – Rs.5,000 = Rs.55,000

Profit and Loss Appropriation Account

This account is a representation of how net profit or net loss is distributed among partners:

Debit Side Includes:

  • Salaries to partners.
  • Interest on drawings by partners.
  • Any other expenses or allowances to partners.

Credit Side Includes:

  • Interest on partners’ capitals.
  • Shared net profit or any other incomes.

Accounting Treatments

  • Interest on Capital: It’s a return on the capital invested by partners. It’s provided to partners on their capital at an agreed rate. Formula: Interest on Capital = Capital × Rate × Time/12
  • Interest on Drawings: Charged against the amount withdrawn by partners for personal use. It depends on the amount and period of drawing.
  • Salaries and Commission: Often partners are provided with salaries or commissions as a part of their remuneration. This is charged against profits.

Accounting for Partnership Firms Class 12 TS Grewal Solutions PDF Download

TS Grewal’s Accountancy book is a popular textbook used by students in Class 12th studying Commerce stream. It is known for its clear and concise explanations of accounting principles and practices. As previously mentioned, using TS Grewal Class 12 Solutions can make your studies more effective and productive. In order to make your studies more convenient and productive for you, we have presented you with Accounting for Partnership Firms Class 12 TS Grewal Solutions PDF for free.

If you want to download the pdf solution, then you can click on the download button given below. The download button will take you to a new page, where you can easily download your TS Grewal Class 12 Solutions PDF for absolutely free of cost.

Conclusion

In conclusion, this was your TS Grewal Class 12 Solutions Chapter 2: Accounting for Partnership Firms- Fundamentals. This chapter elucidates the vital concepts of partnership accounting, which are foundational for class 12 accountancy students. It emphasizes the importance of agreements, mutual understandings, and various financial treatments to ensure transparent and fair accounting. If you have found our solutions helpful, then make sure share with your friends.

FAQs

What’s the difference between fixed and fluctuating capital accounts?

Fixed remains constant unless changed by mutual consent, while fluctuating changes yearly due to various transactions.

What is a Partnership Deed?

It’s a written agreement detailing terms of partnership.

If there’s no partnership deed, how is profit or loss shared?

It’s shared equally among partners.

What does Interest on Capital mean in a partnership?

It’s the return a partner gets for investing capital in the business.

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