Accountancy Part AAccounting for Partnership

If the partnership deed is silent on interest on capital, then:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → No interest on capital is payable

Where the partnership deed is silent, the Indian Partnership Act, 1932 applies. Under it, no partner can claim interest on capital as a matter of right; interest is allowed only when the partners have expressly agreed to it. The 6% rate in the Act is for a partner’s loan to the firm, not for capital.

NCERT (2026-27 edition):
Provisions of Partnership Act Relevant for Accounting – “… (b) Interest on Capital: No partner is entitled to claim any interest on the amount of capital contributed by him in the firm as a matter of right. However, interest can be allowed when it is expressly agreed to by the partners. Thus, no interest on capital is payable if the partnership deed is silent on the issue.”