Partnership accounts

Commerce (General / Accounting and Finance / Banking and Insurance) (B.Com) · Financial accounting · free study notes for exams, placements and interviews

In short

A partnership is a relation between persons who agree to share the profits of a business carried on by all or any of them acting for all, defined in Section 4 of the Indian Partnership Act, 1932. Partnership accounting adds four things to ordinary final accounts: a Profit and Loss Appropriation Account, separate capital and current accounts for each partner, adjustments when the firm's constitution changes (admission, retirement, death, change in ratio), and the Realisation Account on dissolution. It is the single heaviest-weighted chapter in B.Com Financial Accounting (typically 20-30% of the paper) and appears in CA Foundation, CS Foundation, CMA Foundation and B.Com entrance and placement tests. On the job it underlies CA-firm audit and tax work for the lakhs of partnership firms and LLPs in India, and the goodwill and revaluation logic carries directly into company amalgamation accounting.

Explained

Formation, deed and the Act's default rules

Essentials: an agreement between two or more persons, a lawful business, and sharing of profits with mutual agency. Mutual agency is the real test - each partner binds the firm.
Maximum partners: 50, prescribed under Section 464 of the Companies Act, 2013 read with Rule 10 of the Companies (Miscellaneous) Rules, 2014 (the Partnership Act itself sets no ceiling).
Registration of a firm with the Registrar of Firms is optional, but an unregistered firm cannot sue to enforce a contractual right (Section 69).
Partnership deed records capital, profit-sharing ratio, interest on capital and drawings, salary or commission, duties, and procedures on admission, retirement and dissolution.
If the deed is silent, Section 13 applies: profits and losses shared equally; no interest on capital; no salary or commission to any partner; interest on a partner's loan to the firm at 6% p.a. (payable even out of losses, because it is a charge, not an appropriation); no interest charged on drawings.
LLP: governed by the Limited Liability Partnership Act, 2008 - a separate legal person with limited liability; accounts are maintained on broadly the same partner-wise logic, but filing (Form 8, Form 11) and audit requirements are statutory.
Tax note: under the Income-tax Act, interest on capital is deductible to the firm up to 12% p.a. simple interest, and working-partner remuneration up to the Section 40(b) limits, both only if authorised by the deed. Rates and slabs change with Finance Acts, so verify the current year's limits.

Capital accounts, current accounts and appropriation

Fluctuating capital method: one account per partner; capital, interest, salary, share of profit credited, drawings and losses debited - balance changes every year. This is the default when the deed is silent.
Fixed capital method: the Capital Account stays at the agreed figure (changed only on fresh introduction or permanent withdrawal); every other item goes to a Partners' Current Account, which may show a debit (asset side) or credit (liability side) balance.
Order of accounts: Trading and P&L Account gives net profit → P&L Appropriation Account distributes it among partners. Charges against profit (rent to a partner for his premises, interest on partner's loan, manager's commission) go above, in the P&L Account; appropriations (interest on capital, salary, commission to partners, reserve transfer, share of profit) go in the Appropriation Account.
Interest on capital is calculated on opening capital, with time-weighting for additions and withdrawals during the year.
Insufficient profit: if profit is less than the total of interest on capital and salary, and the deed says these are to be allowed only out of profit, the available profit is distributed in the ratio of those appropriations - never create a loss by over-appropriating.
Interest on drawings is income of the firm; use the product method, or the average-period shortcut when drawings are even.
Guarantee of minimum profit: if one partner is guaranteed a minimum, the deficiency is borne by the guaranteeing partner(s) in the agreed ratio after the normal distribution.
Past adjustments / errors: omitted interest, wrong ratio or wrong salary are corrected through an Adjustment Entry routed via Partners' Capital/Current Accounts (or a Profit and Loss Adjustment Account), not by reopening closed books.

Goodwill and change in profit-sharing ratio

Goodwill is the value of a firm's reputation - its ability to earn above-normal profit. Under AS 26 / Ind AS 38, only purchased goodwill may be recognised; self-generated goodwill cannot be raised in the books. So on admission or retirement goodwill is normally adjusted through capital accounts, not shown as an asset.
Methods of valuation:
- *Average profit method:* goodwill = average (or weighted average) adjusted profit × number of years' purchase.
- *Super profit method:* super profit = average profit − normal return on capital employed; goodwill = super profit × years' purchase.
- *Capitalisation of average profit:* goodwill = (average profit ÷ normal rate × 100) − capital employed.
- *Capitalisation of super profit:* goodwill = super profit ÷ normal rate × 100.
- *Annuity method:* goodwill = super profit × present value of an annuity of ₹1 for the agreed years at the normal rate.
Sacrificing ratio = old share − new share (gives up profit). Gaining ratio = new share − old share (acquires profit).
Treatment: the gaining partner compensates the sacrificing partner - Dr Gaining partner's capital, Cr Sacrificing partner's capital, with the proportionate goodwill.
Existing goodwill already in the books is written off in the old ratio before any new arrangement.
On a mere change in ratio among existing partners, also distribute accumulated reserves and revalue assets, or pass a single net adjustment entry through capital accounts.

Admission of a partner

Steps in the exam-standard sequence:

Compute the new profit-sharing ratio and the sacrificing ratio of the old partners.
Write off any existing goodwill in the old ratio.
Treat the incoming partner's goodwill / premium for goodwill: if brought in cash, credit the sacrificing partners in the sacrificing ratio; if not brought in, debit the new partner's capital; if brought partly, split accordingly.
Revaluation Account (also called Profit and Loss Adjustment Account): debit decreases in assets, increases in liabilities and new unrecorded liabilities; credit increases in assets, unrecorded assets and decreases in liabilities. The balance is a profit or loss of the old partners in the old ratio. (If the revised values are not to be carried forward, use a *Memorandum Revaluation Account* in two parts - the second part reversed in the new ratio.)
Distribute accumulated reserves, general reserve, P&L credit balance, workmen's compensation and investment fluctuation funds (excess over liability) to the old partners in the old ratio; deferred revenue expenditure and debit balance of P&L likewise debited.
Record the new partner's capital introduced; adjust the old partners' capitals if they must be in the new ratio (bring in or withdraw cash, or transfer to current accounts).
Prepare the new Balance Sheet of the reconstituted firm.

Retirement and death of a partner

Gaining ratio of continuing partners decides who pays for goodwill: Dr continuing partners in gaining ratio, Cr retiring partner with his share of goodwill.
Revaluation profit or loss, reserves and funds are shared in the old ratio (including the retiring/deceased partner).
Amount due to the retiring partner = capital + current account credit + interest/salary due + share of goodwill + share of revaluation profit and reserves − drawings − share of losses. It is settled in cash, or transferred to his Loan Account and paid in instalments with interest; Section 37 of the Act allows the outgoing partner, in the absence of agreement, 6% p.a. interest on the unpaid amount or a share of subsequent profits, at his option.
On death: the share of profit from the last balance sheet date to the date of death is computed either on a time basis (last year's or average profit × fraction of year) or on a sales/turnover basis, and credited through P&L Suspense Account (when books are not closed) or directly.
Joint Life Policy (JLP): three treatments - (a) premium charged to P&L each year, so on death only the sum received is credited to all partners in the old ratio; (b) policy carried as an asset at surrender value, the excess received credited in old ratio; (c) JLP Reserve maintained alongside. The deceased partner's executor is credited his share.
The amount due to the executor goes to Executor's / Deceased Partner's Account until paid.

Dissolution of the firm

Dissolution of partnership = change in the relation (admission, retirement, death) with the firm continuing; dissolution of firm = business closes and assets are realised (Section 39).
Modes: by agreement (S.40), compulsory on insolvency of all but one partner or on the business becoming unlawful (S.41), on contingency - expiry of term, completion of venture, death or insolvency of a partner (S.42), by notice in a partnership at will (S.43), and by order of court (S.44).
Order of application of assets - Section 48: (1) pay outside debts; (2) repay partners' loans/advances; (3) repay partners' capital; (4) any surplus to partners in their profit-sharing ratio. Losses are met first out of profits, then capital, then by partners individually in their profit-sharing ratio.
Realisation Account entries: debit all assets at book value (except cash, bank, and debit balances of partners' capital and fictitious assets); credit all external liabilities; credit cash realised from assets; debit payment of liabilities and realisation expenses; a partner taking over an asset is debited in his capital account. The closing balance is profit or loss on realisation, shared in the profit-sharing ratio.
Unrecorded assets realised are credited; unrecorded liabilities paid are debited. Provisions and reserves against assets (e.g. provision for doubtful debts) are credited to Realisation Account.
Insolvency of a partner - Garner v Murray (1904): the deficiency in an insolvent partner's capital account is borne by the solvent partners in the ratio of their last agreed capitals (not the profit-sharing ratio), and each solvent partner must bring in cash for his share of the realisation loss. Indian courts follow it only when the deed is silent; many deeds and many exam questions override it, so read the question.
Piecemeal distribution when cash comes in instalments: either the Maximum Loss (notional loss) method - assume the balance unrealised is a total loss at each stage and apportion - or the Proportionate Capital / Surplus Capital method - repay capitals in excess of the profit-sharing proportion first, then bring all capitals to ratio. Outside creditors and partners' loans always come before capital.
Conversion into a company or sale to a company: purchase consideration is recorded through Realisation Account; shares and debentures received are distributed among partners in the agreed ratio.

Key points

Section 4, Partnership Act 1932 - partnership is the relation between persons sharing profits of a business carried on by all or any of them acting for all.
Mutual agency - the conclusive test of partnership; a profit-sharing employee is not a partner.
Section 13 defaults - equal profits, no interest on capital, no salary, 6% p.a. on a partner's loan.
Charge vs appropriation - interest on partner's loan and rent to a partner are charges (P&L); interest on capital and salary are appropriations.
Fixed capital - capital unchanged, all else through Current Account; fluctuating capital - single account absorbs everything.
Sacrificing ratio = old share − new share; gaining ratio = new share − old share.
AS 26 - self-generated goodwill is not recorded; goodwill on reconstitution is adjusted through capital accounts.
Super profit = average profit − (capital employed × normal rate of return).
Revaluation Account - profit or loss belongs to the old partners in the old ratio.
Memorandum Revaluation Account - used when revised values are not to appear in the new balance sheet; second half reversed in the new ratio.
Reserves and accumulated profits on reconstitution go to old partners in the old ratio.
Section 37 - outgoing partner's unpaid dues earn 6% p.a. interest or a share of profits, at his option, if there is no agreement.
Deceased partner's share of current profit - time basis or turnover basis, routed through P&L Suspense Account.
Section 48 - outside debts, then partners' loans, then capital, then surplus in profit-sharing ratio.
Realisation Account - closed by transferring profit or loss on realisation in the profit-sharing ratio.
Garner v Murray - insolvent partner's capital deficiency borne by solvent partners in the ratio of their last agreed capitals.
Piecemeal distribution - maximum loss method or surplus capital method; creditors are paid first in every instalment.
LLP Act 2008 - separate legal entity, limited liability, perpetual succession; a partnership firm has none of these.

Formulas and examples

Interest on capital = Opening capital × rate × (months outstanding ÷ 12). Additions and withdrawals are time-weighted.
Interest on drawings (product method) = Σ(drawing × months outstanding) × rate ÷ 12
Interest on drawings (equal monthly drawings) = Total drawings × rate × (average months ÷ 12); average months = 6.5 if drawn at the beginning of each month, 5.5 if at the end, 6 if mid-month
Average profit = Σ adjusted profits ÷ number of years; Weighted average profit = Σ(profit × weight) ÷ Σ weights
Goodwill (average profit method) = Average profit × number of years' purchase
Super profit = Average profit − (Capital employed × Normal rate of return)
Goodwill (super profit method) = Super profit × number of years' purchase
Goodwill (capitalisation of super profit) = Super profit × 100 ÷ Normal rate of return (%)
Goodwill (capitalisation of average profit) = (Average profit × 100 ÷ Normal rate) − Capital employed
Goodwill (annuity method) = Super profit × annuity factor for n years at r%
Capital employed = All assets (excluding goodwill, fictitious assets, non-trade investments) − outside liabilities
Sacrificing ratio = Old share − New share; Gaining ratio = New share − Old share
Hidden/inferred goodwill on admission = (New partner's capital × reciprocal of his share) − Total capital of the firm after all adjustments including his capital
Deceased partner's profit (time basis) = Last year's (or average) profit × (months to date of death ÷ 12) × his share
Deceased partner's profit (turnover basis) = Sales to date of death × (last year's profit ÷ last year's sales) × his share
Amount due to outgoing partner = Capital + Current a/c credit + Share of goodwill + Share of revaluation profit + Share of reserves + Interest/salary due − Drawings − Share of losses
New capitals in profit-sharing ratio: Total adjusted capital of the firm × each partner's new share

Example 1 - Appropriation with insufficient profit. A and B share profits 3:2. Capitals on 1 April 2025: A ₹4,00,000, B ₹2,00,000. The deed allows interest on capital at 10% p.a. and a salary of ₹60,000 p.a. to B, payable only out of profits. Net profit for 2025-26 before appropriation is ₹90,000.

Interest on capital due: A = 4,00,000 × 10% = ₹40,000; B = 2,00,000 × 10% = ₹20,000. B's salary = ₹60,000. Total appropriations = 40,000 + 20,000 + 60,000 = ₹1,20,000.
Profit available ₹90,000 < ₹1,20,000, so distribute in the ratio of appropriations 40,000 : 20,000 : 60,000 = 2 : 1 : 3 (total 6 parts).
A's interest = 90,000 × 2/6 = ₹30,000; B's interest = 90,000 × 1/6 = ₹15,000; B's salary = 90,000 × 3/6 = ₹45,000.
Nothing is left as divisible profit; the 3:2 ratio is not used at all.

Example 2 - Goodwill by three methods. Profits of the last four years: ₹1,80,000; ₹2,20,000; ₹2,60,000; ₹3,40,000. Capital employed ₹12,00,000; normal rate of return 15%. Goodwill at 3 years' purchase.

Average profit = (1,80,000 + 2,20,000 + 2,60,000 + 3,40,000) ÷ 4 = 10,00,000 ÷ 4 = ₹2,50,000.
*Average profit method:* 2,50,000 × 3 = ₹7,50,000.
Normal profit = 12,00,000 × 15% = ₹1,80,000 → Super profit = 2,50,000 − 1,80,000 = ₹70,000.
*Super profit method:* 70,000 × 3 = ₹2,10,000.
*Capitalisation of super profit:* 70,000 × 100/15 = ₹4,66,667.
*Capitalisation of average profit:* (2,50,000 × 100/15) − 12,00,000 = 16,66,667 − 12,00,000 = ₹4,66,667 (same answer - it must be, as both capitalise at the same rate).
*Weighted average* (weights 1,2,3,4 for the oldest to the latest): (1,80,000×1 + 2,20,000×2 + 2,60,000×3 + 3,40,000×4) ÷ 10 = (1,80,000 + 4,40,000 + 7,80,000 + 13,60,000) ÷ 10 = 27,60,000 ÷ 10 = ₹2,76,000; goodwill = 2,76,000 × 3 = ₹8,28,000 (higher, because profits are rising).

Example 3 - Admission: ratios, revaluation and hidden goodwill. X and Y share 3:2. Balance sheet: Capitals X ₹5,00,000, Y ₹3,00,000; General Reserve ₹1,00,000; Creditors ₹2,00,000; Assets ₹11,00,000 (Stock ₹2,00,000, Debtors ₹3,00,000, Building ₹5,00,000, Cash ₹1,00,000). Z is admitted for a 1/5 share, bringing ₹2,50,000 as capital but no goodwill in cash. Stock is to be reduced by ₹20,000, a provision of 5% created on debtors, building appreciated by ₹80,000, and an unrecorded creditor of ₹10,000 brought in.

New ratio: Z = 1/5; remaining 4/5 shared by X and Y in 3:2 → X = 4/5 × 3/5 = 12/25, Y = 4/5 × 2/5 = 8/25, Z = 5/25. New ratio 12 : 8 : 5.
Sacrificing ratio: X = 3/5 − 12/25 = 15/25 − 12/25 = 3/25; Y = 2/5 − 8/25 = 10/25 − 8/25 = 2/25 → 3 : 2 (the old ratio, since Z takes from both proportionately).
Revaluation Account: debits = stock 20,000 + provision on debtors (5% of 3,00,000) 15,000 + unrecorded creditor 10,000 = ₹45,000; credit = building 80,000. Profit = ₹35,000 → X ₹21,000, Y ₹14,000 (3:2).
General Reserve ₹1,00,000 → X ₹60,000, Y ₹40,000.
Adjusted capitals: X = 5,00,000 + 21,000 + 60,000 = ₹5,81,000; Y = 3,00,000 + 14,000 + 40,000 = ₹3,54,000; Z = ₹2,50,000. Total = ₹11,85,000.
Hidden goodwill: Z's ₹2,50,000 buys 1/5, so the implied total capital of the firm = 2,50,000 × 5 = ₹12,50,000. Goodwill of the firm = 12,50,000 − 11,85,000 = ₹65,000. Z's share = 1/5 × 65,000 = ₹13,000.
Entry: Dr Z's Capital ₹13,000; Cr X's Capital ₹7,800 and Y's Capital ₹5,200 (3:2).
Final capitals: X ₹5,88,800; Y ₹3,59,200; Z ₹2,37,000. Total ₹11,85,000 (unchanged - goodwill was only transferred).
Check the new balance sheet: assets = Stock 1,80,000 + Debtors 2,85,000 + Building 5,80,000 + Cash (1,00,000 + 2,50,000) 3,50,000 = ₹13,95,000; liabilities = Creditors 2,10,000 + Capitals 11,85,000 = ₹13,95,000. It balances.

Example 4 - Death of a partner. P, Q and R share 5:3:2. R dies on 30 June 2025; the firm closes books on 31 March. R's capital ₹2,00,000, drawings to date ₹15,000, interest on capital due ₹4,000. Goodwill of the firm is valued at ₹6,00,000. Profit for 2024-25 was ₹4,80,000; the current year's share is to be taken on a time basis using last year's profit. General Reserve ₹1,50,000.

R's share of goodwill = 6,00,000 × 2/10 = ₹1,20,000, borne by P and Q in their gaining ratio 5:3 → Dr P ₹75,000, Dr Q ₹45,000.
R's share of current profit = 4,80,000 × 3/12 × 2/10 = 1,20,000 × 0.2 = ₹24,000 (Dr P&L Suspense).
R's share of General Reserve = 1,50,000 × 2/10 = ₹30,000.
Amount due to R's executor = 2,00,000 + 4,000 + 1,20,000 + 24,000 + 30,000 − 15,000 = ₹3,63,000.

Example 5 - Dissolution with an insolvent partner (Garner v Murray). L, M and N share 2:2:1. Last agreed capitals: L ₹3,00,000, M ₹2,00,000, N ₹50,000. Sundry assets of ₹6,00,000 realise ₹3,50,000; creditors ₹1,00,000 are paid in full; cash in hand before realisation ₹50,000; realisation expenses ₹10,000. N is insolvent and brings nothing.

Loss on realisation = (6,00,000 − 3,50,000) + 10,000 = ₹2,60,000 → L ₹1,04,000, M ₹1,04,000, N ₹52,000 (2:2:1).
Capitals after loss: L = 3,00,000 − 1,04,000 = ₹1,96,000; M = 2,00,000 − 1,04,000 = ₹96,000; N = 50,000 − 52,000 = ₹2,000 debit (deficiency).
Under Garner v Murray, N's ₹2,000 deficiency is borne by L and M in their last agreed capitals 3,00,000 : 2,00,000 = 3 : 2 → L ₹1,200, M ₹800.
Final capitals payable: L = 1,96,000 − 1,200 = ₹1,94,800; M = 96,000 − 800 = ₹95,200. Total ₹2,90,000.
Cash check: opening cash 50,000 + realisation 3,50,000 = 4,00,000 − creditors 1,00,000 − expenses 10,000 = ₹2,90,000. Agrees.

Situation	Ratio used for goodwill	Ratio for revaluation and reserves	Who pays / receives
Admission	Sacrificing ratio	Old ratio	New partner compensates old
Retirement / death	Gaining ratio	Old ratio (incl. outgoing)	Continuing partners compensate outgoing
Change in ratio only	Sacrificing / gaining ratio	Old ratio	Gainer compensates sacrificer
Dissolution	Not applicable (realised)	Profit-sharing ratio	All partners share realisation profit/loss

Feature	Partnership firm	LLP	Company
Governing law	Partnership Act, 1932	LLP Act, 2008	Companies Act, 2013
Legal personality	None (not separate from partners)	Separate	Separate
Liability	Unlimited, joint and several	Limited to contribution	Limited to shares
Max members	50	No limit	200 (private)
Registration	Optional	Mandatory (MCA)	Mandatory (MCA)
Perpetual succession	No	Yes	Yes

Where it is used

CA, CS and CMA practice: statutory and tax audit of partnership firms and LLPs, Section 40(b) remuneration checks, firm reconstitution deeds and closing accounts on dissolution.
Professional service firms: law firms, CA firms (Deloitte India, Grant Thornton Bharat and most mid-size audit firms are LLPs), architecture and consulting practices - partner capital, drawings and profit-pool accounting.
MSMEs and family businesses: trading firms, dealerships, textile and jewellery businesses in Surat, Tiruppur, Ludhiana and Jaipur typically run as partnerships; bankers reading their balance sheets look at partner capital and drawings.
Banking and NBFC credit roles: credit appraisal of a firm requires reading partners' capital accounts, drawings trends and personal net worth, since liability is unlimited.
Valuation and transaction advisory: the super-profit and capitalisation methods used here are the entry point to business valuation and to purchase-consideration work in amalgamation.
Accounting and finance entry roles: Tally/Zoho Books ledgers for firms, accounts executive and audit assistant roles where appropriation entries and partner current accounts are daily work.

Interview questions

Q: If the partnership deed is silent, what interest is a partner entitled to on a loan given to the firm? A: 6% per annum under Section 13(d) of the Indian Partnership Act, 1932, and it is payable even if the firm makes a loss, because it is a charge against profit, not an appropriation.
Q: What is the difference between a charge against profit and an appropriation of profit? A: A charge is a business expense debited to the Profit and Loss Account whether or not there is profit (interest on partner's loan, rent to a partner); an appropriation distributes available profit (interest on capital, partner's salary, reserve transfer).
Q: Why can't self-generated goodwill be shown in the books? A: AS 26 (and Ind AS 38) permits recognition only of goodwill acquired for consideration, since internally generated goodwill cannot be measured reliably; so on reconstitution it is adjusted through partners' capital accounts.
Q: Who gets the revaluation profit when a new partner is admitted, and why? A: The old partners in their old ratio, because the increase in value arose during their period of ownership, before the new partner acquired any interest.
Q: Differentiate between sacrificing ratio and gaining ratio. A: Sacrificing ratio (old share − new share) is the share given up, normally on admission; gaining ratio (new share − old share) is the share acquired, normally on retirement or death, and decides who pays for goodwill.
Q: How is hidden goodwill computed on admission? A: Capitalise the incoming partner's capital by the reciprocal of his share to get the implied firm value, then subtract the total of all partners' adjusted capitals; the difference is the firm's goodwill.
Q: What is the rule in Garner v Murray and when does it apply in India? A: An insolvent partner's capital deficiency is borne by the solvent partners in the ratio of their last agreed capitals, not the profit-sharing ratio, and each must bring in cash for his share of the realisation loss. It applies only when the deed is silent on the point.
Q: Distinguish dissolution of partnership from dissolution of the firm. A: Dissolution of partnership changes the relation between partners (admission, retirement, death) while the business continues; dissolution of the firm ends the business and all assets are realised and liabilities settled under Section 48.
Q: In what order are assets applied on dissolution? A: Section 48: outside debts first, then partners' loans and advances, then partners' capital, and any surplus to partners in their profit-sharing ratio.
Q: Which items are not transferred to the Realisation Account? A: Cash and bank balances, partners' capital and current accounts, partners' loan accounts, accumulated reserves and fictitious assets - these are handled directly through the capital accounts or the cash account.
Q: A partner is guaranteed a minimum profit of ₹1,00,000 but his normal share works out to ₹70,000. Who bears the shortfall? A: The deficiency of ₹30,000 is borne by the guaranteeing partner(s) in the ratio agreed for the guarantee - if no ratio is specified, by the remaining partners in their profit-sharing ratio.
Q: Why does a bank treat a partnership firm's loan as riskier than a private company's, from an accounting point of view? A: The firm has no separate legal personality and partners' liability is unlimited and joint and several, so the bank must assess partners' personal net worth and drawings as well as the firm's accounts; the firm can also dissolve on a partner's death or notice.

Common mistakes

Using the profit-sharing ratio instead of the sacrificing or gaining ratio for goodwill adjustment, and the gaining ratio instead of the old ratio for revaluation and reserves.
Forgetting to write off existing goodwill in the old ratio before adjusting new goodwill, which double-counts it.
Showing interest on a partner's loan in the Appropriation Account instead of the Profit and Loss Account, or allowing interest on capital when the deed is silent.
Distributing insufficient profit in the profit-sharing ratio instead of in the ratio of the appropriations when the deed makes them payable only out of profit.
Time-weighting errors in interest on drawings - using 6 months when drawings are made at the beginning of each month (it is 6.5) or at the end (5.5).
Transferring cash, partners' capital or partners' loan to the Realisation Account, and omitting unrecorded assets realised or unrecorded liabilities paid.
Applying the profit-sharing ratio to an insolvent partner's deficiency when Garner v Murray requires the ratio of last agreed capitals, or forgetting that the rule only operates when the deed is silent.