CA Success Path- Foundation

Accounts full syllabus Test on 29 August

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CS Mitali Jain 🥳🎀💙

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Types of partners: 1) Active or Actual or Ostensible Partner: A person who has become a partner by agreement and actively participates in the conduct of the partnership business is known as an actual or active or ostensible partner. In the event of retirement, he had to give public notice in order to relieve himself of all liabilities for acts of other partners done after the retirement. 2) Sleeping or Dormant Partner: A person who is a partner by agreement and who does not actively take part in the conduct of the partnership business. A sleeping partner share profits and is also liable to the third parties for all acts of the firm. Public notice is not required in the event of retirement. 3) Nominal Partner: A person who lends his name to the firm without having any real interest in it is called a nominal partner. He is not entitled to share the profits of the firm. Neither he invests in the firm nor takes part in the conduct of the business. However, a nominal partner is liable to third parties for all acts of the firm. 4) Partner in profits only: A partner who is entitled to share profits only without being liable for the losses is known as the partner for profits only and is also liable to the third parties for all the acts of the firm. 5) Incoming Partner: A person who is admitted as a partner into an already existing firm with the consent of all the existing partners is called an incoming partner. Such a partner is not liable for any act of the firm done before his admission as a partner. 6) Outgoing Partner: A partner who leaves the firm in which the rest of the partners continue to carry on business is called a retiring or outgoing partner. Such a partner remains liable to third parties for all acts of the firm until public notice is given of his retirement. 7) Partner by Estoppel: When a person, who is not a partner in the firm, represents himself as a partner in a firm, he is liable to anyone who, on the faith of such representation, has given credit to the firm.

As per the provision of the Indian Partnership Act, 1932, the following are the mutual rights and duties of partners: - i) Right to remuneration: No partner is entitled to receive any remuneration in addition to his share in the profits of the firm for taking part in the business of the firm. But this rule can always be varied by an express agreement or by a course of dealings in which the partner will be entitled to remuneration. Where it is customary to pay remuneration to a partner for conducting the business of the firm, he can claim it even in the absence of a contract for the payment of the same. ii) Right to share Profits: Partners are entitled to share equally in the profits earned and so contribute equally to the losses sustained by the firm. There is no connection between the proportion in which the partners shall share the profits and the proportion in which they have contributed towards the capital of the firm. iii) Interest on Capital: The following elements must be there before a partner can be entitled to interest on money brought by him in the partnership business: a) An express agreement to that effect or practice of the particular partnership or b) Any trade custom to that effect; or  c) a statutory provision which entitles him to such interest. iv) Interest on advances: Suppose a partner makes an advance to the firm in addition to the amount of capital to be contributed by him; in such a case, the partner is entitled to claim interest thereon @ 6% per annum. While interest on capital account ceases to run on dissolution, the interest on advances keeps running even after dissolution and up to the date of payment. v) Right to be indemnified: Every partner has the right to be indemnified by the firm in respect of payments made and liabilities incurred by him in the ordinary and proper conduct of the business of the firm as well as in the performance of an act in an emergency for protecting the firm from any loss if the payments, liability and act are such as a prudent man would make, incur or perform in his own case, under similar circumstances. vi) Right to indemnify the Firm: A partner must indemnify the firm for any loss caused to it by willful neglect in the conduct of the business of the Firm

Submit by 7 pm

Submit by 7 pm

As per the provision of the Indian Partnership Act, 1932, a document which contains various terms and conditions related to the relationship of partners to each other is called a partnership deed. The information contained in a partnership deed is as follows: 1) Name of the partnership firm. 2) Name of all the partners. 3) Nature and place of the business of the firm. 4) Date of commencement of partnership. 5) Duration of the partnership firm. 6) Capital contribution of each partner. 7) The profit-sharing ratio of the partners. 8) Admission and retirement of a partner. 9) Rates of Interest on Capital, Drawings and Loans. 10) Provisions for settlement of accounts in the case of dissolution of the firm. 11) Provisions for salaries or commissions payable to the partners, If any. 12) Provisions for the expulsion of a partner in case of breach of duty or fraud Ms Lucy, while drafting the partnership deed to take care of few important points: i) The partnership agreement must be in writing. An oral partnership agreement is not a partnership deed. ii) The partnership deed contains various terms & conditions as to the relationship of the partners to each other. iii) The partnership comprises of immovable property, then the partnership deed must be in Writing, stamped & registered under Registration Act. iv) If the partnership comprises of no immovable property, then the partnership deed must be writing and Stamped according to the provisions of Stamp Act, 1899.

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As per the provision of the Indian Partnership Act, 1932, in determining whether a group of persons is or is not a firm, or whether a person is or not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. For determining the existence of a partnership, the following things must be present: 1) Agreement: Partnership is created by agreement and not by status. The relation of partnership arises from the contract and not from status. 2) Sharing of Profit: Sharing of profit is an essential element to constitute a partnership. But, it is only prima facie evidence and not conclusive evidence in that regard. The sharing of profits would not by itself make such person partners. 3) Agency: The existence of Mutual Agency which is the cardinal principle of partnership law, is very much helpful in reaching a conclusion in this regard. Each partner carrying on the business is the principal as well as an agent of other partners. So, the act of one partner done on behalf of the firm binds all the partners.

As per the Indian Partnership Act, 1932, the registration of a partnership firm is not mandatory. An Indian partnership firm need not be registered from the beginning but can be registered during continuation also. But, if a partnership firm is not registered, it has to face some consequences: 1) No suit in a civil court by the firm or other co-partners against the third party: The firm or any of its partners cannot bring an action against the third party for breach of contract entered into by the firm unless the firm is registered. 2) No relief to partners for set-off of claim: If an action is brought against the firm by a third party, then neither the firm nor the partner can claim any setoff for more than ₹100 or pursue other proceedings to enforce the rights arising from any contract. 3) An aggrieved partner cannot bring legal action against other partners or the firm: A partner of an unregistered firm (or any other person on his behalf) cannot bringing legal action against the firm or any partner of the firm. But, such a person may sue for dissolution of the firm or for accounts and realization of his share in the firm’s property if the firm is dissolved. 4) Third-party can sue the firm: In the case of an unregistered firm, an action can be brought against the firm by a third party.

Submit by 7 pm

Submit by 7 pm