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Home / Partnership - Management & Accounts

Partnership - Management & Accounts

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Management
Accounting & Audit

Management

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How Partnership is taxed?

Partnership are run and managed as per the terms and condition given in the partnership deed entered into between the partners, unless specially prohibited, every partner has to right to carry on the business on behalf of the firm.

Generally, all the decisions are taken by majority vote between the partners unless otherwise provided in the deed or any specific partner is authorized to take that decision individually.  There is no concept of meeting, decisions are taken by oral conversation and no records are maintained of such decisions. Partnership are basically run and managed on the basis of trust and mutual understanding between partners. In some partnerships , all the partners doesn’t take part in day to day management activities of the firm, specific partners called as managing partners are responsible for managing the business.     

Rights of Partners

Unless otherwise provided in partnership deed, the basic rights of partners include:

  1. To take part in the conduct of the business
  2. To access and inspect the books of firm.
  3. To share profit & losses
  4. To represent the business

Accounting & Audit

Books of Account

Generally, Partnership firm are not mandatory required to maintain books of account with respect to their business but as per the Income Tax, following types of business if carried on under partnership are required to maintain such books of accounts as would enable the assessing officer to compute the total income of the business in accordance with provisions of Income Tax Act:

  1. Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette
  2.  Every person carrying on business or profession (not being a profession referred to in para a above) shall,
    (i)  if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or
    (ii)  where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or

In case of business not falling aforesaid, it is always to maintain the necessary books of accounts relating to the following

  1. All sales and purchases of goods by the company;
  2. Assets and liabilities of the company;

 Method of Accounting

Though no specific methodology has been prescribed for partnership but as general accounting practice, partnership firm shall maintain their books of account on accrual basis and the double entry system of accounting. The fundamental assumption of going concern shall also be followed.

Accounting Standards

Partnerships are not required to comply with any accounting standards

Fiscal Period

The fiscal period which is generally followed under the Income Tax Act 1961 is 1st April-31st March every year.

Audit Requirements

Statutory Audit

There is no statutory requirement of audit of books of accounts of partnership firm

Tax Audit

Where the total sales, turnover or gross receipts of the business of the Company exceed Rs. 40 Lacs (Rs. 10 Lacs in case of profession) in any financial year of the company, than a the accounts shall be audited by chartered accountant and tax audit report based on the same, is required to be submitted to the tax authorities’ alongwith the Return of Income of the business.

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