Partnership Firms Accounts 🤝

Definition: Relation between persons who agree to share profits of business carried on by all or any of them acting for all (Indian Partnership Act, 1932).

Opening the Account 📝

1. Documents Required

• Partnership Deed: Main document (shows partners' names, powers).
• Registration Certificate: (Optional, but preferred).
• KYC of all Partners.
• PAN of the Firm.

2. Partnership Letter (Mandate) 📜

Bank takes a letter signed by ALL partners stating:

• Who will operate the account (All jointly / Any one / Specific partner).
• Admitting Joint and Several Liability (Every partner is liable for full debt).
• Authority to overdraw account.

Operations & Rules ⚖️

1. Authority to Bind Firm

• Implied Authority: In a trading firm, a partner has implied power to borrow money and draw cheques in firm's name.
• Restriction: If Deed restricts a partner, bank must follow it.

2. Cheques ✍️

• Cheques payable to firm must be credited to firm's account (Not to partner's personal account).
• Risk: If partner puts firm's cheque in his personal account, banker is liable for Conversion (negligence).

3. Stopping Payment 🛑

• Any one partner can stop payment of a cheque issued by another partner.
• Bank must honor this instruction.
• Revocation: To remove stop payment, ALL partners must agree (usually).

4. Death of a Partner ⚰️

• Rule: Partnership dissolves on death (unless Deed says otherwise).
• Bank's Action:
  • Stop operations immediately (to fix liability).
  • Cheques signed by deceased partner → Return unpaid.
  • Survivor partners can open new account for winding up.

5. Insolvency of Partner 💸

• Insolvent partner's authority ends.
• Cheques signed by him → Return unpaid.

Joint & Several Liability 🔗

Crucial Concept:

• Joint: All partners liable together.
• Several: Each partner individually liable for entire debt.
• Bank's Benefit: If firm defaults, bank can recover 100% money from the richest partner alone!

Quiz Time! 🎯

💡 Final Wisdom: "Partnership is like a marriage. If one partner cheats or dies, the account (and often the business) freezes!" 🧊

Next up: Company Accounts - The legal person! 🏢