Question

In the absence of express agreement, interest @ 6% p.a. is provided ______.

Options

• On opening balance of partner’s capital accounts

• On closing balance of partner’s capital accounts

• On loan given by partners to the firm

• On opening balance of partner’s current accounts

Answer 1

In the absence of express agreement, interest @ 6% p.a. is provided on loan given by partners to the firm.

Explanation:

In the absence of a partnership deed, the rules of the Indian Partnership Act, 1932, apply. According to these rules, partners are not entitled to interest on capital or current accounts, nor is interest charged on drawings. However, if a partner gives a loan to the firm, he is entitled to receive interest @ 6% per annum, even if the firm incurs a loss.