Partnership Deed:

A partnership is formed by an agreement. This agreement may be oral or in writing. Though the law does not expressly require that the partnership agreement be in writing, it is desirable to have it in writing so that in case of a dispute, it may be readily referred to "A document containing the agreement in written between partners, in which the rights, duties and obligations of partners are set out in detail, is known as partnership Deed."

Where there is neither partnership deed nor express agreement or partnership deed is there but it is silent on any matter, then the relevant provisions of the Indian partnership Act, 1932, would be applicable. In the absence of any written or oral agreement, the under mentioned provisions of the Partnership Act shall apply for accounting purposes:

1. Interest on Capital: No interest is to be allowed on capitals. If under the agreement, interest is to be paid, it will be allowed only when there is a profit- in the case of a loss, no interest can be allowed.
2. Interest on Drawings: No interest is to be charged on drawings made by the partners.
3. Interest on Loan: If any partner, apart from his share of capital, advances loan to the firm, he is entitled to receive interest at the rate of 6% per annum.
4. Salary to Partner: No partner is entitled to a salary from the firm.
5. Profit-Sharing Ratio: Profit and losses are to be shared equally amongst partners irrespective of their capitals contributed to the firm.

v  Essential elements of partnership:

1.      Association of two or more persons: There should be at least two competent persons to from a partnership. The maximum number of partners in a firm carrying on banking business should not exceed ten and in any other business twenty

2.      Agreement or contract: The partnership relation is one of contractual nature. It arises from an agreement. The agreement may be express (i.e., oral or written) implied.

3.      Business: A partnership can be formed only for the purpose of carrying on a business. Business includes every trade, occupation or profession. The business to be carried on by the firm must be legal.

4.      Sharing of profits: The object of partnership must be to earn profit must be distributed among partners in an agreed ratio. The sharing of profits also includes sharing of losses.

5.      Mutual agency. The business of partnership may be carried on by all the partners or any of them acting for all. Thus, a partner is both an agent and the principal. There must be mutual agency.