Question

Discuss the main provisions of the Indian Partnership Act, 1932 that are relevant to partnership accounts if there is no partnership deed.

Answer 1

The following are the main provisions of the Indian partnership Act, 1932 that are relevant to the partnership accounts in absence of partnership deed.

1.Profit Sharing Ratio: If the partnership deed is silent on sharing of profit or losses among the partners of a firm, then according to the Partnership Act of 1932, profits and losses are to be shared equally by all the partners of the firm.

2.Interest on Capital: If the partnership deed is silent on interest on partner’s capital, then according to the Partnership Act of 1932, no interest on capital should be given to the partners of the firm. However, interest on capital is given only out of the profits, if mutually agreed by all the partners.

3.Interest on Drawings: If the partnership deed is silent on interest on partner’s drawings, then according to the Partnership Act of 1932, no interest on drawing should be charged from the partners of the firm for the amount of capital withdrawn in the form of drawings.

4.Interest on Partner’s Loan: If the partnership deed is silent on interest on partner’s loan, then according to the Partnership Act of 1932, the partners are entitled for 6% p.a. interest on the loan forwarded by them to the firm.

5.Salary to Partner: If the partnership deed is silent on salary to a partner, then according to the Partnership Act of 1932, no salary should be given to any partner.