Partnership Accounts

Step 1: Define the concept.
A Joint Life Policy (JLP) is an insurance contract in which two or more partners of a firm are insured under one policy. The premium is paid by the firm.
Step 2: Purpose.
It provides financial support to the firm upon the death of any partner. The amount received can be used to pay the deceased partner’s legal representatives, settle his capital account, or strengthen the firm’s finances.
Step 3: Accounting treatment.
- Premium may be treated as \emph{an expense} (debited to P& L). - Alternatively, a \emph{Joint Life Policy A/c} may be maintained, shown as an asset. - At death/maturity, the policy proceeds are credited to partners’ capital accounts in the profit-sharing ratio.
Step 4: Key feature.
The policy covers the lives of all partners collectively, unlike individual policies that cover only one person.
Final Answer:

Step 1: Revaluation at admission.
When a new partner is admitted, all assets and liabilities may be revalued. But one asset that is always adjusted is Goodwill.
Step 2: Reason.
Goodwill ensures that existing partners are compensated for the reputation and profits earned by the firm before the admission of the new partner.
Step 3: Conclude.
Thus, at admission, Goodwill is compulsorily revalued/adjusted.
Final Answer:

Step 1: Meaning of drawings.
Drawings mean the amount withdrawn by partners for personal use from the firm.
Step 2: Interest on drawings.
When partners withdraw money, they must pay interest to the firm. This interest is an earning for the firm.
Step 3: Accounting treatment.
Interest on drawings is recorded as income for the firm and credited to Profit and Loss Appropriation Account.
Step 4: Conclude.
Thus, interest on drawings is treated as income for the firm.
Final Answer:

Step 1: Concept of Partnership Act.
According to the Indian Partnership Act, 1932, when there is no partnership deed, certain default rules are applicable. These default provisions clearly state what partners are entitled to and what they are not.
Step 2: Entitlements under absence of deed.
- Partners are not entitled to receive any salary.
- Partners are not entitled to receive any commission.
- Partners are not entitled to receive any interest on capital invested.
Step 3: Justification.
The reason is that in the absence of a deed, the law assumes equal partnership and avoids granting extra benefits unless specifically agreed.
Step 4: Conclude.
Hence, partners are not entitled to get salaries, commission, or interest on capital — that means “All of these”.
Final Answer:

Step 1: Nature of Joint Life Policy.
A joint life policy (JLP) is taken jointly on the lives of all partners. On death of any one partner, the insurance company pays the full policy amount to the firm.
Step 2: Why not surrender value?
Surrender value is relevant only if the policy is discontinued before maturity. On actual death, the full policy amount is received.
Step 3: Conclude.
Hence, the firm receives the full policy amount.
Final Answer: