Accountancy Part AAccounting for Partnership

Identify the document that contains the terms of the agreement betwee…

Read the following information and answer the questions.

A and B entered into partnership to supply stationery items without any terms and conditions. A contributed ₹1,00,000 as capital while B contributed ₹20,000 only but he allowed his building to be used as the firm office. After running business for nine months, they felt an urgency of funds and the same was fulfilled by B by providing ₹80,000 as loan to the firm. At the end of the accounting year, they made a profit of ₹50,000. They decided to expand their business in future by admitting C into the firm and also to make agreement in writing containing all the terms and conditions.

Identify the document that contains the terms of the agreement between the partners.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Partnership Deed

A partnership agreement may be oral or written. When it is in writing, the document that contains its terms is called the Partnership Deed.

NCERT (2026-27 edition):
Partnership Deed – “Partnership comes into existence as a result of agreement among the partners. The agreement can be either oral or written. The Partnership Act does not require that the agreement must be in writing. But wherever it is in writing, the document, which contains terms of the agreement is called ‘Partnership Deed’. It generally contains the details about all the aspects affecting the relationship between the partners including the objective of business, contribution of capital by each partner, ratio in which the profits and the losses will be shared by the partners and entitlement of partners to interest on capital, interest on loan, etc.”