Question

Explain the fundamentals of accounting for partnership firms

Answer 1

Partnership firms are established by joint venture of two or more people, who own the business, invest in it and share the profit/loss finally.

Investment can be either in terms of money or asset.

Based on the percentage of initial investment, profit is shared accordingly.

If there is a sleeping or silent partner, he just invests in the capital amount initially, but the efforts to run the firm successfully are taken care by the other working partners.