Partnership is an association of two or more persons to carry on business with intent to profit. Governed by Partnership Act, 1932 in India. Key characteristics: Multiple owners (partners), Mutual agency (each partner can bind others), Joint liability (partners liable for partnership debts), Transferability of interest restricted, Limited life (partnership ends on partner's exit). Partnership Accounts are prepared similar to sole proprietorship but with complications due to multiple partners. Key Areas: Capital Accounts show investment and share of profit/loss, Current Accounts accumulate interest and allocations, Profit sharing according to partnership deed or equal share, Drawings by partners deducted from accounts. Financial Statements: Trading Account (similar to sole proprietor), Profit & Loss Account (adds allocation to partners), Appropriation Account (divides profit among partners), Balance Sheet (shows all partners' interests). Partnership Deed defines: Profit sharing ratio, Salaries to partners, Interest on capital, Interest on drawings, Guarantees/liabilities. Accounting Principles: Maintain separate accounts for each partner, Allocate profit according to deed provisions, Distinguish between capital and current accounts, Disclose partner transactions/guarantees. Exam tip: Understand partnership structure and legal framework; grasp the significance of partnership deed; distinguish capital from current accounts; master the allocation process.