Question

Interest on capital will be paid to the partners if provided for in the partnership deed but only out of ______.

Options

• Profits

• Reserves

• Accumulated Profits

• Goodwill

Answer 1

Interest on capital will be paid to the partners if provided for in the partnership deed but only out of profits.

Explanation:

As per the Indian Partnership Act, 1932, partners are entitled to interest on capital only if it is provided in the partnership deed, and that too is payable only out of profits of the firm. It cannot be paid out of reserves, accumulated profits, or goodwill. Hence, the correct answer is profits.