Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

Read the following passage and answer the question.

Rita, Sudha, and Nitu decided to do transport business in partnership. For this purpose, they did not prepare any deed. They introduced their capitals, ₹50,000, ₹60,000 and ₹40,000 respectively and commenced business from 1st April. On the same date, Nitu also provided ₹15,000 as a loan to the firm on the requirement. At the end of the first financial year, the firm earned a net profit of ₹10,000 (excluding interest on loan). Nitu asked for interest on the loan at 10% p.a, while Sudha asked for interest on capital at 5% p.a. But for both terms, Rita did not agree. 

What will be the percentage for interest on Partners' Capital ?
Options:
10%
6%
5%
No interest will be provided on capital
Correct Answer:
No interest will be provided on capital
Explanation:
As per the partnership Act 1932, there will not be any interest on partners' capital .