Partnership Deed

The direct answer is option A: a partnership deed is a written agreement among the partners. It is prepared to record the mutually accepted rules of the partnership. It may state each partner's capital, profit-and-loss sharing ratio, drawings, interest, duties, powers, admission or retirement rules, and methods of settlement. This written record reduces confusion and helps settle disagreements. Option B, a list of customers, is a business record but does not define the partners' mutual rights. Option C, a bank statement, is supplied by a bank and merely reports account transactions. Option D, a tax receipt, proves payment of a tax and is not an agreement between partners. Therefore A gives the exact meaning. Memory cue: deed means a formal written document; partnership deed means the partners' written rulebook.

A partnership deed is a written agreement among the partners. It records important rules such as the profit-sharing ratio, capital contributions, drawings, interest, salaries, commissions, duties, and procedures for resolving disagreements. When these matters are written clearly, each partner knows the agreed rights and responsibilities. This reduces misunderstanding and makes the management of the firm more orderly.

Therefore, the main purpose among the given choices is to reduce disputes, so option A is correct. Stopping sales, hiding cash, or removing customers is not the purpose of a partnership deed. The deed does not prevent normal business activity; instead, it provides a common set of rules for conducting that activity fairly and consistently.

Direct answer: option A, to share profit and loss. A partnership deed is the written agreement that records important terms accepted by the partners. The profit-sharing ratio tells how the firm’s profit, and normally its loss, will be divided among partners. For example, a ratio of 2:1 means two shares for one partner and one share for the other, after the relevant accounting adjustments. Option A is correct because this is the direct purpose of recording the ratio. Option B, buying goods, concerns purchasing operations, not the division of results. Option C, reducing rent, concerns an expense negotiation. Option D, changing the bank, concerns banking arrangements. The ratio prevents disputes by making the agreed division clear. Memory cue: partnership ratio answers ‘who gets how much of the result?’

If the ratio is absent profit is shared equally. In exams remember equal share in absence of agreement.

The deed may mention each partner's capital. In exams include capital contribution in contents.

The governing concept is that a partnership deed records the mutually agreed terms governing partner remuneration and profit appropriation. When the deed specifies an interest-on-capital rate, that rate provides the basis for calculating the amount credited or allowed on a partner’s eligible capital balance. For example, if the relevant capital is ₹1,00,000 and the agreed annual rate is 6%, the annual amount is ₹6,000, subject to the applicable conditions and period. Therefore, option A is correct. Bank interest is a finance-related item involving a bank, wages concern employees or workers, and the tax rate is determined by tax law rather than by this partnership clause. None of those distractors explains the purpose of recording interest on capital in the deed.

The key point is that partners’ rights (including interest on capital) depend on the partnership deed. If the deed is silent about interest on capital, partners are not entitled to interest — so option A is correct. Option B is wrong because interest at a specified rate applies only if the deed expressly states that rate. Option C is incorrect because there is no automatic 10% rule. Option D is incorrect because paying interest out of profits requires a provision or agreement; silence does not create that right. Exam tip: always read the deed first; if it is silent, apply the default rules under partnership practice or the Partnership Act provisions.

The governing concept is interest on drawings. Drawings are cash, goods, or other resources withdrawn by a partner from the firm for personal use. If the partnership deed provides for interest on drawings, the charge is calculated with reference to the amount withdrawn and, where relevant, the date or period of withdrawal. Thus, the clause is directly related to the amount withdrawn by a partner, so option A is correct. A machine purchased by the business is a firm asset and is not a drawing. A bank loan is an outside liability and may create interest payable to the bank, not interest on drawings. A customer discount affects sales or revenue and has no connection with a partner’s personal withdrawal.

Without agreement interest on drawings is not charged. In exams treat it as a clause based item like capital interest.

The governing concept is contractual authorization of partner remuneration. A partner does not automatically become entitled to salary merely because the partner performs work for the firm. Salary, commission, or other remuneration is allowed when the partnership deed contains a clear provision or when the partners later enter into a valid agreement authorizing it. The agreement may specify the amount, rate, duration, performance conditions, and method of payment. Therefore, option A is correct. A customer’s preference cannot create a contractual right for a partner, the price of goods is a trading matter, and a bank passbook is only a record of banking transactions. In accounting treatment, partner salary is generally an appropriation of profit rather than an ordinary expense payable to an outside employee.

The governing concept is contractual remuneration under a partnership agreement. A partner is not automatically entitled to commission merely because the partner participates in sales or helps the firm earn profit. The deed records whether the partner is eligible and establishes the basis, rate, amount, period, and conditions for calculation. For example, it may provide a fixed amount or a stated percentage of net profit or sales; the exact base must be read carefully because different bases produce different amounts. Thus, option A is correct. Removing sales tax is a matter of tax law, stopping cash sales is an operational decision, and destroying goods is unrelated to remuneration. None of those activities explains why a commission clause is included in the deed.

Names and addresses clearly identify the partners. In exams treat this as common content of the deed.

The firm's name is entered in the deed to provide clear identification of the business, distinguish it from other firms, and to be used in legal and commercial transactions (e.g., bank accounts, contracts, registration). Option B refers to profit‑sharing ratio which is a different clause in the deed and is not the reason for naming the firm. Options C and D are irrelevant. Exam tip: always mention the firm's name, address and date of formation/commencement when describing deed contents.

The governing concept is identification of the firm and its business location. Stating the principal place of business or registered office in the partnership deed gives the firm a clear address for correspondence, records, notices, and ordinary administrative purposes. It also helps distinguish the partnership from other businesses with similar names and supports transparent documentation of the agreement. Therefore, option A is correct. The address does not automatically increase interest, reduce the number of partners, or stop profit. Those matters depend on financial terms, partner decisions, and business performance rather than on the place clause.

The governing concept is the nature or character of the activity undertaken by the firm. It describes what the partnership does, such as trading in goods, providing services, manufacturing products, or carrying on another lawful commercial activity. This term helps define the firm’s purpose and the scope within which partners are expected to operate. Therefore, option A is correct. The colour of a bank account has no accounting significance, the number of employees is only an operating statistic, and the language of advertising is a marketing choice. None of those explains the nature of business.

Duration makes the period of partnership clear. In exams understand fixed term and partnership at will.

Direct answer: option A, the method of maintaining accounting records. A clause about keeping books of account explains how the partnership will record transactions, preserve ledgers and journals, prepare accounts, and maintain financial evidence. It may also identify responsibility, place, or procedure for maintaining those records, depending on the deed. Option A is therefore directly related to accounting administration. Option B, shop decoration, concerns appearance and has no necessary connection with books of account. Option C, a customer identity card, concerns customer identification, not recording financial transactions. Option D, goods packing, concerns handling or presentation of goods. The wording ‘books of accounts’ is the exam clue: it points to systematic financial record-keeping. Memory cue: books means records, not shelves or packaging.

The governing concept is the accounting period, which provides a consistent time frame for recording transactions and determining the firm’s financial results. Mentioning the accounting year helps establish the period for preparing accounts, calculating profit or loss, and making the related appropriations among partners. For instance, results may be measured for a twelve-month period ending on a specified date, subject to applicable law and the firm’s agreed practice. Thus option A is correct. Increasing customers, choosing the colour of goods, and stopping bank charges are business or banking matters, not purposes of an accounting-year clause.

The governing concept is a partner’s right to access and inspect the firm’s books and accounting records. This right enables partners to verify transactions, profits, drawings, liabilities, and the proper application of the partnership agreement. It supports transparency, protects each partner’s financial interest, and can help identify errors or unauthorized use of firm resources. Therefore, option A is correct. Customers may receive information relevant to their transactions, but they do not ordinarily have a general right to inspect the partnership books. A post office or insurance agent has no such general entitlement either.

The admission clause states the process of bringing a new partner. In exams treat admission as a change in partnership.

A retirement clause clarifies the process when a partner leaves. In exams view it as a dispute preventing point.

The death clause helps settle the amount due to the partner. In exams link it with the partner's claim.

The dissolution clause states how the firm is closed and assets are settled. In exams link it with final settlement.

Goodwill is important during changes like admission and retirement. In exams link it with change in partners.

Interest on a partner's loan to firm is decided by deed or rule. In exams keep loan separate from capital.