Question

Mr.Ashok and Mr. Babu were two sole proprietors' doing similar business. They were competing each other and in order to attract customers towards them, they indulged themselves in reducing price of their commodity. Consequently, their profit margin reduced and gradually were facing loss. One fine day they met each other and decided to do the business jointly as a partnership firm with the intention of avoiding competition and earn more. profit. The smooth and successful running of a partnership firm requires a clear understanding among its partners regarding the various policies governing their partnership. The partnership deed (agreement in writing) serves this purpose. The partnership deed brings clarity to the partners with regard to profit/loss sharing, salary, interest on capital, drawings, admission of a new partner, etc. Though issuing a partnership deed is not mandatory, they both felt it is better to enter into a partnership deed to avoid any possible disputes and litigation among them in future. Hence, they approached an Auditor to draft a partnership deed for them.​

Answer 1

Answer:

Mr.Ashok and Mr. Babu were two sole proprietors' doing similar business. They were competing each other and in order to attract customers towards them, they indulged themselves in reducing price of their commodity. Consequently, their profit margin reduced and gradually were facing loss. One fine day they met each other and decided to do the business jointly as a partnership firm with the intention of avoiding competition and earn more. profit. The smooth and successful running of a partnership firm requires a clear understanding among its partners regarding the various policies governing their partnership. The partnership deed (agreement in writing) serves this purpose. The partnership deed brings clarity to the partners with regard to profit/loss sharing, salary, interest on capital, drawings, admission of a new partner, etc. Though issuing a partnership deed is not mandatory, they both felt it is better to enter into a partnership deed to avoid any possible disputes and litigation among them in future. Hence, they approached an Auditor to draft a partnership deed for them.

Explanation:

Mr.Ashok and Mr. Babu were two sole proprietors' doing similar business. They were competing each other and in order to attract customers towards them, they indulged themselves in reducing price of their commodity. Consequently, their profit margin reduced and gradually were facing loss. One fine day they met each other and decided to do the business jointly as a partnership firm with the intention of avoiding competition and earn more. profit. The smooth and successful running of a partnership firm requires a clear understanding among its partners regarding the various policies governing their partnership. The partnership deed (agreement in writing) serves this purpose. The partnership deed brings clarity to the partners with regard to profit/loss sharing, salary, interest on capital, drawings, admission of a new partner, etc. Though issuing a partnership deed is not mandatory, they both felt it is better to enter into a partnership deed to avoid any possible disputes and litigation among them in future.

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