Accounting Concepts

Partnership firm accounts: capital, drawings, interest and remuneration

1 min read Updated 30 Sep 2026 3 views

AI summary

The entries every partnership firm needs, with the income tax limits.

4 sections

Create for each partner:

Capital A/c under Capital Account (money brought in)
Current A/c (optional, for interest, salary, drawings and profit share, keeping capital fixed)

Capital brought in (F6)

Bank A/c                       Dr  5,00,000
    To Partner A – Capital A/c                  5,00,000

Drawings (F5)

Partner A – Current A/c        Dr    40,000
    To Bank A/c                                   40,000

Interest on capital at year-end (F7)

Interest on Partners' Capital A/c   Dr  60,000
    To Partner A – Current A/c                    60,000

Remuneration (F7)

Partners' Remuneration A/c     Dr  3,00,000
    To Partner A – Current A/c                  3,00,000

Profit share is transferred from Profit & Loss to the partners' current accounts in the agreed ratio.

Item	Maximum allowed as expense
Interest on capital	12% a year, simple interest, and only if the deed allows it
Remuneration to working partners	On the first ₹6 lakh of book profit (or a loss): ₹3,00,000 or 90% of book profit, whichever is higher. On the rest: 60%

The partnership deed must authorise both, with the amount or method.

Salary, remuneration, interest, commission or bonus to a partner above ₹20,000 in a year needs 10% TDS.

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