Category Partnership

Purchase of Interest Method

This is a private method of acquiring the existing partner’s interest in the firm. Whenever a new person wants to become a partner, he or she negotiates with the existing partner and pays him outside the firm any amount agreed…

Fixed Capital Method

In this method of profit & loss distribution, we do not touch capital accounts of partners. Instead, separate current accounts are opened against for each partner to record transactions of drawings, interest on capital, commission, partner’s salaries. Capital accounts in…

Partnership Accounts Questions and Answers

Partnership Accounts Questions and Answers We have covered various topics of Partnership such as Formation, Withdrawal of funds, Distribution of Profit & Loss, Revaluation of assets, retirement of partners and dissolution of partnership firm. Now, it is the right time to practice some…

Fluctuating/ Floating Capital Method

It is also called floating method. In this method, capital account is used for all adjustments of interest on capital, drawings, partner’s salaries, commission and share of profit. Journal Entries To record distribution of net profit: Description Debit Credit Profit…

Goodwill Method

Goodwill arises due to good name and reputation of the business and partners.  It is calculated by subtracting the book value and the value of investment made by the new partner. This method is used when the existing partners do…

Bonus Method

In this method, existing partners agree to reduce their capital in the partnership firm. The difference between the investment of the new partner and the book value of the capital is called the Bonus and is distributed among the existing…

Admission of Partner(s)

Partnership busines may be expanded and for this, some new partners may be introduced in order to effectively run the operations of the business. When new partners are added, some changes and adjustments are made in the accouting books. After…