Read the following information and answer the questions.
A and B entered into partnership to supply stationery items without any terms and conditions. A contributed ₹1,00,000 as capital while B contributed ₹20,000 only but he allowed his building to be used as the firm office. After running business for nine months, they felt an urgency of funds and the same was fulfilled by B by providing ₹80,000 as loan to the firm. At the end of the accounting year, they made a profit of ₹50,000. They decided to expand their business in future by admitting C into the firm and also to make agreement in writing containing all the terms and conditions.
In case A wants to claim interest on capital as he had contributed five times the capital that B had contributed, then select the amount of interest on capital that will be paid to A.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → No interest on capital will be allowed to A
A and B have no partnership deed. Under the Partnership Act, no partner can claim interest on capital as a matter of right; it is allowed only when the partners expressly agree to it. A’s larger capital does not change this.
Option (1) ₹8,000 — Incorrect. No rate has been agreed, so no amount of interest on capital can be worked out.
Option (2) ₹6,000 — Incorrect. This applies 6% to A’s capital; the 6% rate of the Act is for a partner’s loan, not for capital.
Option (3) Interest on capital will be provided 6% p.a. — Incorrect. The Act fixes no rate of interest on capital; without an agreement, nothing is allowed.
NCERT (2026-27 edition): |