Question

In the absence of a partnership deed, the following rule will apply:

Options

• No interest on capital

• Profit sharing in capital ratio

• Profit-based salary to working partner

• 9% p.a. interest on drawings

Answer 1

No interest on capital

Explanation:

In the absence of a partnership deed, the provisions of the Indian Partnership Act, 1932, apply. As per these rules, no interest is allowed on partners’ capital, profits and losses are shared equally (irrespective of capital contribution), no salary or commission is given to any partner, and no interest is charged on drawings. However, if a partner gives a loan to the firm, interest at 6% per annum is allowed.