Africa Nazarene University

ACC 102 Fundamentals of Accounting II

Individual Assignment
1. Characteristics of a Partnership firm
2. How a partnership contract is formed

Rodney Chatata 18J01APS003

Submitted to Mr

1
Partnerships can be described as an agreement between two or more
individuals who have mutual interests and are bound together by a legal
document (usually a contract) of sorts that splits the responsibilities of
business i.e management and ownership.
The coming together of these entities is by choice/voluntary, they are one
as a business (mutual agency) but are still separate outside of the
business, this means that each partner has their own account in relation to
the business.

There are three main types of partnerships, further split into two groups
(liability or duration) as per the nature of the partnership.

Liability
 Limited Partnerships. This type of binding means that all except one
partner (general partner) have limited liability. The general partner
runs the affairs of the firm.
 General Partnerships. All members have unlimited liabilities and take
part in management activities.
Duration
 Particular partnership. When partnerships are created for a particular
project or a specific time only. The venture performs well, it can be
continued as a general partnership. Otherwise, it can be dissolved.

A contract can be defined as a written or spoken agreement that is

enforceable by law, it binds the members of the said agreement legally.

Contract formation follows the following basic steps:

 An offer or proposal has to be made.
 Acceptance and Agreement. This stage involves the evaluation of the
offer by the other party and if satisfied by the terms, they then accept
to enter into the partnership.
 Legal enforceability. The agreement is now a legally binding
document.

The binding document contains details such as:

 Sharing of both profits (dividends) and losses.
 Decision making and administration
 Dispute resolution
 Capital (resource) acquisition
 Ownership percentages
A breach of contract can be punishable by termination of the partnership
or legal action depending on the scope of the offence

2
References

Business jargons, Partnerships. Retrieved from:

https://businessjargons.com/partnership.html.

S. Solivic, Constant Contact, 6 Things Every Partnership Agreement

Needs. Retrieved from: https://blogs.constantcontact.com/6-things-every-
partnership-agreement-needs/?clickid=xvwW9a3myxyORx-
wUx0Mo3EWUknSx-
RoJ1og0U0&AID=205991&PID=123201&cc=CLK_DCLKAFF_IR_123
201_205991&pn=iraffiliate.

W. Cierny et al. Successful partnerships. Forum on Partnerships and

Local Governance at ZSI (Centre for Social Innovation) 2008.