Accounting treatment for a partnership firm is similar to that of a s…

Accounting treatment for a partnership firm is similar to that of a sole proprietorship business except the following aspects:

(A) Distribution of Profit and Loss among the partners

(B) Dissolution of Partnership Firm

(D) Adjustments for Wrong Appropriation of Profits in the Past

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (A), (B) and (D) only

A partnership keeps its books much like a sole proprietor, but having several owners brings in extra work: each partner’s capital, the division of profit among them, correcting past errors in that division, changes in the partners, and the closing of the firm.

(A) Distribution of Profit and Loss among the partners — Correct. A sole proprietor keeps all the profit; a firm must divide it among the partners.

(B) Dissolution of Partnership Firm — Correct. Closing a firm needs a Realisation Account and settlement among the partners, which a sole proprietorship does not have.

(C) Raising Capital through public offering — Incorrect. A partnership firm cannot invite the public to subscribe; capital comes from the partners. A public offer belongs to a company.

(D) Adjustments for Wrong Appropriation of Profits in the Past — Correct. An omission such as interest on capital changes what each partner should have got, so it is corrected between the partners.

NCERT (2026-27 edition):
Special Aspects of Partnership Accounts – “Accounting treatment for partnership firm is similar to that of a sole proprietorship business with the exception of the following aspects: Maintenance of Partners’ Capital Accounts; Distribution of Profit and Loss among the partners; Adjustments for Wrong Appropriation of Profits in the Past; Reconstitution of the Partnership Firm; and Dissolution of Partnership Firm.”