SS1 Commerce Lesson Note on Sources of Capital in Partnership

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TOPIC: Partnership

CONTENT:

• (4) Sources of Capital
• (5) Advantages and disadvantages
• (6) Dissolution

SUB-TOPIC1: SOURCES OF CAPITAL 

1. Personal contribution: The partners raise the initial capital by contributing specified sums of money to the partnership.
2. Undistributed profits: Profits made in certain years can be ploughed back into the business for the purpose of expansion.
3. Admission of new partners: Additional capital can be raised by inviting new persons to become partners.
4. Loans and overdraft: Partners can easily obtain loans and overdraft from banks since they are jointly liable.
5. Trade credit: Money can be obtained from middlemen in advance in order to facilitate production of goods.

EVALUATION

1. State five sources of capital to a partnership business.

SUB-TOPIC 4: ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP

Advantages of Partnership

1. Sufficient Capital: It is easier to raise more capital than a sole proprietorship because of the number of persons involved in this business.
2. Division of Labour: The work of a firm is shared according to the area of specialization of each partner, for instance, an accounting firm may have one partner specializing in cost accounting while the other concentrates on auditing.
3. Better Chance of Continuity: There is greater continuity in partnership because the exit or death of one partner may not result to the dissolution of the business.
4. Better Decision: Better decisions are reached because two are better than one
5. Greater possibility of expansion: There is the possibility of expansion by making use of additional capital derived from the admission of a new partner.

DISADVANTAGES OF PARTNERSHIP

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