CUET Preparation Today
In which situation interest on partner's capital is provided by the partnership firm? |
When the partners contribute unequal amounts of capitals but share profits equally Where the capital contribution is same but profit sharing is unequal. Where the capital contribution is different and profit sharing is also different Both options 1 & 2 |
Both options 1 & 2 |
The correct answer is option 4- Both options 1 & 2. No interest is allowed on partners’ capitals unless it is expressly agreed among the partners. When the Deed specifically provides for it, interest on capital is credited to the partners at the agreed rate with reference to the time period for which the capital remained in business during a financial year. Interest on capital is generally provided for in two situations: (i) when the partners contribute unequal amounts of capitals but share profits equally, and (ii) where the capital contribution is same but profit sharing is unequal. Interest on capital is calculated with due allowance for any addition or withdrawal of capital during the accounting period. |
