Characteristics of a partnership.

1. Partnership Accounts
Mr Arthur

2. Aims of the Lesson
1. Partnerships??
2. Advantages/ Disadvantages of Partnerships

3. Partnerships?
 A partnership is a form of business, where
partners share profits
 Consists of between 2-20 members
 No written agreement is required but
agreement is recommended
 Examples
 Accountants
 Solicitors
 Dentists

4. Advantages/Disadvantages of
Partnerships
 Advantages
 Easy to form, no legal
formalities
 Partners can combine
expertise
 Combine capital
 Spread workload
 Share decision making
 Easier to raise funds
i.e. loans etc
 Disadvantages
 More people to share
in the profits
 General partners have
unlimited liability
 Disagreements can
occur
 Partnership may be
dissolved if partner
dies

5. Aims of Lesson 2
Last Lesson
1. Partnerships??
2. Advantages/
Disadvantages of
Partnerships
Today’s Lesson
1. Partnership
Agreements
2. Section 24 of
Partnership Act

6. Partnership Agreements
 Most partnerships create a Partnership
Agreement when forming. This will include
details of:
 Amount of Capital to be invested
 How profits and losses should be shared
 Amount of drawings allowed
 Interest on Capital
 Interest on drawings
 Salary agreements

7. Section 24 of Partnership Act 1890
 When partners do not create a partnership
agreement they are protected by section 24 of
Partnership Act 1890. It states:
 All partners are entitled to contribute equally
 Profits and losses are to be shared equally
 No interest is payable on capital invested
 Partners are entitled to 5% on loans given to the
partnership
 Accounts must be freely available to partners
 No salaries
 No new partners can be introduced without prior
agreement

8. Aims of Lesson 3
Last Lessons
 Partnerships??
 Advantages/
Disadvantages of
Partnerships
 Partnership
Agreements
 Section 24 of
Partnership Act
Today’s Lesson
1. Limited partners
2. Accounting for
partnerships

9. Limited Partners
 Under the Limited Partnership Act 1907 a
partnership may register to allow one or more
partners to have limited liability
 Limited partners may not:
 Withdraw any capital they have invested during
the lifetime of the business
 Manage the partnership
 Makes contracts on behalf of the partnership

10. Partnership Accounts
 In addition to a T, P and L Account, a
partnership will prepare an Appropriation
Account, and keep separate Capital, Drawings
and Current Accounts for each partner