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Partnership - Management & Accounts
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:
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:
In case of business not falling aforesaid, it is always to maintain the necessary books of accounts relating to the following
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.
Partnerships are not required to comply with any accounting standards
The fiscal period which is generally followed under the Income Tax Act 1961 is 1st April-31st March every year.
There is no statutory requirement of audit of books of accounts of partnership firm
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.