ACCOUNTING FOR PARTNERSHIP
CHARACTERISTICS OF PARTNERSHIP
- Association of individuals
The voluntary associationof two or more individuals on partnership maybe based on as simple an act a handshake. However,it is preferable to state the agreement in writing. Under the uniform partnership act, a partnership is legal entity for certain purposes. For property ( land,building, equipment) can be owned in the name of partnership, and the firm can sue or be sued. A partnership also is in accounting ebtity for financial reporting purposes.
- Mutual agency
Mutual agency means that each partner acts on behalf of the partnership when engaging in partnership bussiness. The act of any partner binding on all other partners. This is true even when partners act beyond te scope of their authority , as long as the act appears to be appropriate for the partnership
- Limited life
A partnership does no have unlimited life . it may be ended voluntary at any time
Through the acceptance of a new partner or the withdrawal partners. A partnership maybe e nded involuntaliry by the death or incapacity of a partner
- Ulimited liability
Each partnrs is personally and individually liable for all partnership liabilities . Creditors claims attach first to partnership assets.
- Co-ownership of property
Partnership assets are owned jointly by the partners, if the partnership is disolved , the assets do not legally revert to the original contributor. Each parner has a claim on total assets equal to the balance in his or her respective capital account.