There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion (A): Interest on Partner's loan is allowed at the agreed rate of interest and in the absence of agreement, it is allowed @ 10% p.a.
Reason (R): In the absence of a Partnership Deed or oral agreement, interest on Partner's loan is not allowed.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- Both Assertion (A) and Reason (R) are false.
Assertion (A): Interest on Partner's loan is allowed at the agreed rate of interest and in the absence of agreement, it is allowed @ 10% p.a. THIS IS FALSE because in the absence of agreement interest is provided @ 6% p.a. not 10% p.a.
Reason (R): In the absence of a Partnership Deed or oral agreement, interest on Partner's loan is not allowed. THIS IS FALSE because whether there is agreement or not interest on partner's loan is provided as it is charge against profit not appropriation of profit.
Thus, both statements are false.