What traumatic event does Zitkala-Sa describe at the school?

The forcible cutting of her long hair

Why was the cutting of her hair so humiliating to Zitkala-Sa?

Among her people, shingled hair was worn by cowards and mourners

What is the maximum number of partners allowed in a firm?

The Central Government, under Section 464 of the Companies Act 2013, has prescribed a maximum of 50 partners in a firm; the minimum is two.

What is a partnership deed?

It is a written document containing the agreed terms and conditions of a partnership, covering profit-sharing ratio, capital, interest, salary and other matters.

In the absence of a partnership deed, how are profits shared?

They are shared equally among all partners, irrespective of capital contribution, because the Indian Partnership Act 1932 applies.

What rate of interest is allowed on a partner's loan when the deed is silent?

Interest is allowed at 6% per annum on a loan advanced by a partner to the firm.

Distinguish fixed and fluctuating capital methods.

Under the fixed method, capital stays unchanged and a separate current account records adjustments; under the fluctuating method, all adjustments pass through a single capital account so its balance changes each year.

Why is the Profit and Loss Appropriation Account prepared?

To show how net profit is appropriated among partners through interest on capital, salary, commission, interest on drawings and the final share of profit.

How is interest on drawings treated?

It is an income for the firm; the partner's capital (or current) account is debited and interest on drawings is credited to the appropriation account.

What is meant by guarantee of profit to a partner?

It is an assurance of a minimum amount of profit to a partner; any deficiency is borne by the guaranteeing partner or partners in the agreed ratio.

When is a past adjustment entry passed?

When errors or omissions in interest on capital, salary or profit sharing of earlier years are discovered, a single adjusting entry corrects the partners' accounts.

What is mutual agency in partnership?

It means every partner can bind the firm and other partners by acts done in the ordinary course of the firm's business, acting as both principal and agent.

Accounting for Partnership: Basic Concepts

Class 12 Accountancy · Accountancy Part I · Chapter 1

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Summary

When two or more persons agree to carry on a business and share its profits and losses, they form a partnership, as defined in Section 4 of the Indian Partnership Act 1932. The essential features are an association of two or more persons (maximum 50), an agreement, a lawful business, mutual agency and the sharing of profits. The agreement among partners is recorded in a written partnership deed; where the deed is silent, the provisions of the Act apply, so profits and losses are shared equally, no interest is allowed on capital or charged on drawings, no salary is paid to any partner, and a partner who advances a loan to the firm earns interest at 6% per annum. Partners may keep their capital accounts under the fixed capital method (separate capital and current accounts) or the fluctuating capital method (a single capital account). Profits are distributed through a Profit and Loss Appropriation Account, which records interest on capital, partners' salary or commission, interest on drawings and the final division of the remaining profit in the agreed ratio. The chapter also explains the guarantee of a minimum profit to a partner and the use of a past adjustment entry to rectify errors or omissions in earlier appropriations.

Nature and features of partnershipPartnership deed and rules in its absenceFixed vs fluctuating capital accountsProfit and Loss Appropriation AccountInterest on capital, drawings and guarantee of profit

Key terms

Partnership

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 (Section 4, Indian Partnership Act 1932).

Partnership Deed

A written agreement among partners stating the terms governing capital, profit sharing, interest, salary and other matters.

Mutual Agency

The principle that each partner is both principal and agent, able to bind the firm and the other partners by acts done in the course of business.

Profit and Loss Appropriation Account

An extension of the Profit and Loss Account that distributes net profit among partners after charging appropriations such as interest on capital and salary.

Fixed Capital Method

A method in which each partner keeps a fixed capital account and a separate current account for adjustments like interest, salary and drawings.

Interest on Drawings

A charge made on amounts withdrawn by a partner for personal use, credited to the firm and debited to the partner.