Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

Which of the following situations generally calls for the provision of interest on capital in a partnership?

Options:

When the partners contribute equal amounts of capital and share profits unequally

When the partners contribute unequal amounts of capital but share profits equally

Both options 1 and 2

When the partners contribute unequal amounts of capital and share profits unequally

Correct Answer:

Both options 1 and 2

Explanation:

Option 1- When the partners contribute equal amounts of capital and share profits unequally.
Option 2- When the partners contribute unequal amounts of capital but share profits equally
Generally, in both these situations interest on capital is provided to the partners by a partnership firm.