Partnership comes into existance as a results of agreement among the partners. The Agreements can be either oral or written. The Partnership act does not require that the agreement must be in writting, But whenever it is in writting, the document, which contains terms of the agreement is called "Partnership Deed".
The clause of partnership deed can be altered with the consent of all the partners. The deed should be properly drafted and prepared as per the provisions of the 'Stamp Act' and preferably registered with the 'Registrar of Firms'.
The Partnership deed usually contains the following details:-
1. Name and Address of the firm and its main business,
2. Name and Address of the all Partners,
3. Amount of capital to be contributed by each partner,
4. The accounting period of the firm,
5. The date of commencement of Partnership,
6. Rule regarding operation of Bank Accounts.
7. Profit and Losses sharing Ratio,
8. Rate of Interest on capital, Loan and drawing etc.,
9. Mode of auditors appointment, If any;
10. Salaries, Commission etc. if payable to any partner;
11. The rights, duties and liabilities of each partner,
12. Treatment of loss arising out of insolvency of one or more partners;
13. Settlement of accounts on dissolution of the firm;
14. Method of settlement of dispute among the partners;
15. Rules to be followed in case of admission, retirement and death of partner; and
16. Any other matters relating to the conduct of business.
Normally, the partnership deed covers all matters affecting relationship of partners amongst themeselves.
* Provisions relevant for accounting:-
The important provisions affecting partnership account are as follow's:-
(a) Profit Sharing Ratio:- If the partnership deed is silent about the profit sharing ratio the profits and losses of the firm are to be shared equaly be partners, irrespective of their capital contribution in the firm.
(b) Interest on Capital:- No partner is entiled to claim any interest on the amount of capital contributed by him in the firm as a matter of right. However, Interest can be allowed when it is expressly agreed to the partners. The Interest is payable only out of the Profits of the Business and not if the firm incurs losses during the period.
(c) Interest on Drawing:- No interest is to be charged on the drawing made by the partners, if there is no mention in the deed.
(d) Interest on Advance:- if any partner has advanced some money to the firm beyond the amount of his capital for the prossure of business, he shall be entitled to get interest on the amount of the rate of 6% per annum.
(e) Remuneration of Firm's work:- No partner is entitled to get salary or other remuneration for taking part in the conduct of the business of the firm unless there is a provision for the same in the "Partnership Deed".
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