What's up everyone, welcome back to the channel. So guys, we are going to start our accountancy's first unit today, which is going to be Partnership Fundamentals. I will teach you Partnership Fundamentals in such detail and in such a magnificent way that there will be no shortage in your basics. And I am damn sure that you are not going to have any problem in partnership, no matter what exam you are giving. So let's start quickly and start understanding partnership and all its concepts and then we will do the same practice. Come on, let's begin. Come on, let's start. Everyone will put a heading along with me. Partnership Fundamentals. Okay, sir? Sir, what actually is partnership and what are we going to study in Fundamentals? We will study very basic today, not too much, but we will cover a lot of things today. See, in your class 11 accounts, we have studied a lot about sole proprietorship. Right? What is sole proprietorship, sir? Sole proprietorship is a single owner business, in which there is only one individual who invests all the money, all the risk is his, all the reward is his. So there will be profit or loss. He takes it individually to his house, which we normally, all the profit, whatever net profit comes out of P&L, what we do is we add it to the capital account. Adding to the capital account means adding it to the balance sheet capital. This is what you used to study. Now we have to see a transition from sole proprietorship to partnership. Sir, what is partnership and what is its need? See kids, what happens is whenever an individual thinks of growing a business, then how much money should a single person invest? How much time should a single person bring? How much managerial skill should a single person bring? How much risk should he take alone? So if more than one partner will be there, that is 2, 3, 4, 5 people will be there, 6 people will be there, 10 people will be there. Minimum 2, maximum 50. Keep in mind at least 2, maximum 50. When so many people will come together, then of course money will also be more. Risk will also be divided. Along with that, managerial skills, ability, talent, when people will be joined together, then a big business will be made, in which growth potential will be more, money will also earn more, profit sharing will also be easily done. So all these benefits happen when you convert from sole proprietorship to partnership. Now when we come to partnership, so in partnership I have told you, at least 2 people will be there, that is 1 Chintu, 1 Chinti, and maximum can be up to 50 people. So minimum 2, maximum 50. Now sir, these people will make some agreement among themselves, these people will make some document among themselves, in which all these terms and conditions will be written about partnership. That how will any individual get profit sharing in partnership? If any person puts extra effort, then will he get any extra salary? Will he get any extra bonus? Will he get any extra commission? If a firm has taken a loan, then what will be the interest on loan? How will all these things work? So to write all these terms and conditions, we make a written document, we make a written agreement, which we call the partnership deed. What do we call this? Partnership deed. The other name of partnership deed is articles of partnership. So in articles of partnership, we have all these terms and conditions written, relating to the partnership business. Now see kids, what happens? Now to move forward in partnership, I want to explain some small things to you. There is a concept, whose name is separate legal entity concept. You have read this in class 11th. The separate legal entity concept. What does separate legal entity concept say? That the partners, the individuals are different, and the firm is different. This means that our Chintu and Chinti are different. And the business firm that these two will make together, the business firm that they will make, this business firm is different. So whatever accounting you will do, whatever books of accounts you will make, whatever profits and losses you will do, you are going to do all this for this business firm. Because the individual can do it himself. You have to make the books of accounts of this firm. Now what do we have to learn mainly in this? See kids, what happens to us is that there are three accounts of this particular firm, which are normally made. What are the three accounts made? Sir, the first account that you have to learn is P&L Appropriation Account, on which we will discuss today. The second account that we have to learn is Capital Account. The third account that we have to learn is Current Account. And there are some small accounts too, like Rent Payable Account, Partners Loan Account. As we dive deep into the chapter, we will try to learn it there. For now, you have to keep in mind that P&L Appropriation, Capital Account, Current Account, we have mainly three accounts, which we have to learn. Now sir, what are they? How do they work? If you want to take a screenshot of all this, then take it. Then we will start doing it. Now see kids, you read in class 11th that all the incomes and expenses that we have, we write them in an account, which we call the Profit and Loss Account. What is Profit and Loss Account? This is an account of nominal nature. What is nominal nature? Nominal nature is Debit All Expenses and Losses, Credit All Incomes and Gains. This means that all expenses and losses will be written in debit, all incomes and gains will be written in credit. So what happens? Here it starts with Gross Profit Brought Down. Whatever G.P. you have. Then you write all the incomes of the firm, like I am writing all incomes here, some rent received, some interest received, there is some rent, there is some interest, there is some discount, there is some commission, some bad debts are recovered, BDR means Bad Debts Recovered, please write. So some rent was received, interest was received, discount was received, commission was received, bad debt was recovered, whatever happened, whatever income happened, we used to write it here. What did we do after that? All the expenses in the firm business, we used to write expenses here, To All Expenses, Whatever the expense, all expenses are written here, all expenses, all selling expenses, distribution expenses, administration expenses, depreciation, advertisement, carriage outwards, multiple expenses, audit fees, legal charges, outwards expenses, all expenses are written here. Then what we used to get? You got total inflow, you got so much money, you spent it from this, so if something was still left, let's suppose here the expense of 1 crore earned is 80 lakhs, so 20 lakhs are left, we used to call that 20 lakhs as Net Profit. What do we call this? Net Profit. Now when this net profit used to be sole proprietor, then he used to keep the net profit individually, he used to take it to his house, now it won't happen here because there is no sole proprietor, there are 2 people, 3 people, 4 people, 5 people here, so this profit will be divided, the account that will be made to distribute this profit, ladies and gentlemen, that account is called Profit and Loss Appropriation Account. This means that all the incomes in the business, all the expenses in the business, they will be written here only, don't get confused on this at all, any employee's salary, anything related to the employee, any expense related to the business, which will be written before calculating the profit, whether it is an income or an expense, it will be written in P&L only. But once you have the profit, you have taken all the expenses, all the incomes, now you have the profit, it has to be distributed, so to distribute this profit, the account that is made, we call that account the P&L Appropriation Account. So P&L Appropriation is nothing else, this P&L has been pulled forward, so that's why it is called an extension to P&L account, if you extend P&L, if you pull it a little, then the extension of P&L becomes P&L Appropriation, and P&L Appropriation is also an account of nominal nature, nominal nature means that all the expenses will come in debit only, all the expenses will come in debit only, all the incomes will come in credit only, now sir where is the expense income left, now only profit is left, so what are we talking about expense income here, now see kids, let's discuss this a little, first of all, where does it start from, first of all we bring this net profit here, so let's write this by P&L account, net profit, the net profit that you got, it came here, now see I had just told you, that partners are different, firm is different, partners are different and firm is different, now in this firm, partners have invested money, these partners have invested money here, what is this money called, capital, any money when an individual invests in any business, then it is called capital, these partners will say very clearly to the firm, brother it is like this, if we had not invested our money in the business and kept it in the bank, then the bank would have increased some percentage for us, the bank would have given us some interest somewhere, so you also give us interest on this capital, so what does the firm have to do, first of all the firm has to give some share to the partner, which we call interest on capital, now what is interest on capital for the firm, for the firm it is a kind of expenditure, money is coming out of the business only, is it coming out or not children, so if this is thought under the Debit All Expenses Losses, then money is going from the profit, but it is not going in the name of profit, it is going in the name of interest, it is going to the partners only, it is not going in the name of profit, so what do we do, whatever profit has come to us, this profit is divided into some small parts, like giving interest on capital to the partners, some partner did some extra work, so he got a separate salary, some partner got some bonus, some partner got some commission, we took some money out of the profit and saved it for the future, so what do we call it, we call it reserve, now suppose you assume that you got the same profit of 20 lakhs, profit of 20 lakhs, some interest on capital went, interest on capital of 2 lakhs went, asked for a salary of 1 lakh, some bonus of 2 lakhs went, some commission of 2 lakhs went, we added some for the future, like 2, 3, 4, 5, 6, 7, we added 3 lakhs for the future, that we should save something for the future also, so 20 lakhs is divided in the partners only, just names are different, like some went in the name of interest, some in the name of salary, some in the name of bonus, some in the name of commission, we added this in the firm for the future, but ultimately money is of the partners only, this is also, but it is kept in the partner only, the last 10 lakhs which is left, we call it divisible profit, what do we call it, divisible profit, that this is the profit, which we will divide in the name of profit only, rest was also profit, but for different activities, it was taken in different names, that this was taken against the capital, this is for extra work, this is for good work, this must have been taken to do some sale, so this profit is being distributed in different names only, nothing else, so you don't get confused at all, profit is only being divided, just its names are different, understood, so in this way kids, understood this IOC part, that business has to be paid, similarly there is a concept, when business says, you put money with us, so asked for interest from us, now you also withdraw some money from us, which we call drawings, partner withdraws money for personal use, so business says, we should get interest on this, so firm gets interest on drawings, firm has profit, firm gets money, interest on drawings, so see what happens here kids, first of all we wrote net profit, after that firm will get interest on drawings, so interest on drawings will come in credit, let's suppose there are only 2 partners, A and B, so A and B's interest on drawings is written here, so firm has total amount of money, this was in the name of profit, and this is now in the name of interest on drawings, this one in the name of profit, and this one in the name of interest on drawings, so firm has total amount of money, now what firm will do is, it will divide the profit, just names will be different, like this will be in the name of interest, to interest on capital, this will be given in the name of interest, Sir, will this be given in the question? How much interest on drawings? How much interest on capital? Yes. All this is according to the partnership deed. Everything is written in the partnership deed that how things will be. Sir, if there is no partnership deed, we will discuss about that too. Okay, IOD is done, IOC is done, with that of any partner. Remember children, all this is for the partner. Partner's salary, bonus, commission. SBC means salary, bonus, commission. After that, if you have added some money, then it is called reserve. So if there is any reserve, then that has come. Then the profit that will come to you from this income, from this money, we have removed all these expenses. Minus all this. When this is gone, then the value that will remain from this, we will call it divisible profits. What will we call that? Divisible profits. And these divisible profits will be distributed in A and B. Sir, in which ratio? In profit sharing ratio. PSR is profit sharing ratio. Either it will be decided, children. If it is not decided, then it will be equal. Either decide it. If it is not decided, then it will be equal. This thing has to be taken care of. So see, this P&L account, when you reach here to distribute the final profits, if you extend this, if you increase this further, then this extension is called P&L appropriation account. Understood? Now all the things that have come here, whether it is interest on drawings, whether it is interest on capital, whether it is salary bonus commission, whether it is reserve, whether it is profits, all this will be calculated as per partnership deed and will be adjusted as per partnership deed. Sir, if there is no partnership deed, then what will happen? What are the rules in the absence of partnership deed? The first rule is, children, no interest on capital will be given. No interest on capital will be provided. Either write in deed, if there is no deed, then it will not be given. Second, no interest on drawings will be charged. No interest on drawings of any kind will be charged from you. Being a partner, it is taken from you, so we will not charge it. Third, we will not give any kind of salary, bonus, commission, etc. We will not give any salary, bonus, commission. There will be no IOC, there will be no IOD, there will be no salary, bonus, commission. After that, profits or losses to be shared equally. Child, all the profits or losses will always be equally divided. Either write, make a deed, if there is no deed, then equally. Last but not the least, if the firm has taken a loan, then interest on loan has to be paid. Interest on loan to be paid, all this is happening from the point of view of the firm. At 6% per annum, the firm will pay it at a rate of 6% per annum. So children, if there is no partnership deed, then what rules will be followed? There will be no IOC, there will be no IOD, there will be no salary, bonus, commission. Profits and losses will be equally divided. Interest on loan will be paid at a rate of 6% per annum. So these are some basic rules that you should know about the partnership fundamentals. My aim today was to mainly teach you P&L appropriation account. The next class is going to be a very good class because we will learn to calculate interest on drawing. Which is a complete concept in itself. So see how our next classes are going to run. First of all, nothing happens in this thing. Now I will teach you this. So your P&L appropriation part will end here. The whole class will remain on interest on drawings. This part will end, then I will teach you this part. Gradually IOC, salary, bonus, commission, reserve, I will teach this part. Where this has come to you, then assume that your fundamentals have become very strong. Because this comes from this chapter mainly. There is nothing in capital current account. It is very easy. Then gradually we learn journal entries too. Now today you please note all these basics. All these basics are going to be very useful to you. Will help you a lot. I don't know what happened. Will help you a lot. And in the same way you have to work hard. Things have to be made. And I will help you in all your basics. And we will score well by working hard. Alright. So that's all for today. Revise it so well. Whatever book you have taken. Go through it once. What is written in it. What I have explained to you. Make your notes. And study well. Alright. Thank you so much guys for joining in. I will meet you tomorrow with another new video. Till then see ya. Take care. Bye bye. If you liked the video, then like it. Comment and tell me. I understood it well. Share it with all your friends. Quickly reach 3 million subscribers. This is my current target. Right. Thank you so much everyone. Thank you. Thank you. Thank you. Thank you.