While the Accounting Entity Convention requires that we keep Goochie's business affairs separate to his personal transactions, Goochie and Advanced Hoy are the same legal entity. Goochie can be sued for the debts of Advanced Hoy without any limitation. Partnerships Partnerships are non-incorporated firms in which 2 or more persons have equity in the firm. It is not necessary that all partners contributed assets to the firm that are reflected in the balance sheet. One partner may be granted an ownership interest in the firm in return for providing managerial labour, or specialist advice.
Partnerships involve a mutual agency relationship.
This effectively means that each partner is an agent of the other. Partnerships share profits according to the terms of a formal partnership agreement, or in the absence of such an agreement, evenly among partners. Accounting for partnerships is very similar to that for sole traders, you simply have one Capital Account for each partner. Partners make drawings in the same way as sole traders. If one partner dies, or leaves the partnership, that partnership is dissolved.