Accountancy Part AAccounting for Partnership

In the absence of partnership deed: (A) Partners are allowed interest…

In the absence of partnership deed:

(A) Partners are allowed interest on capital @ 6% p.a.
(B) Partners are allowed interest on loan advanced by them @ 6% p.a.
(C) Partners are allowed salary, if they are working partners.
(D) Profits are shared according to capital ratio.
(E) Profits are shared in equal ratio.

Choose the correct answer from the options given below.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (B) and (E) only

When there is no partnership deed, the Indian Partnership Act, 1932 applies: profits are shared equally, no interest on capital, no salary, no interest on drawings, but interest at 6% p.a. on a loan given by a partner.

(A) Partners are allowed interest on capital @ 6% p.a. — False. No interest on capital is allowed.

(B) Partners are allowed interest on loan advanced by them @ 6% p.a. — True. A partner’s loan earns 6% p.a.

(C) Partners are allowed salary, if they are working partners. — False. No partner is entitled to salary or remuneration.

(D) Profits are shared according to capital ratio. — False. Profits are shared equally, whatever the capitals.

(E) Profits are shared in equal ratio. — True. This is the rule of the Act.

NCERT (2026-27 edition):
Provisions of Partnership Act 1932 applicable to accounting – “… According to the Partnership Act, the partners share profits equally, no partner is entitled to remuneration, no interest on capital is allowed and no interest on drawings is charged. However, if any partner has given some loan to the firm, he is entitled to interest on such amount @ 6% per annum.”