There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A): In the absence of any agreement between partners, interest on the amount due to the Deceased Partner is paid @ 6% p.a. on the outstanding amount.
Reason (R): Unpaid amount is a loan to the firm. The Partnership Act, 1932 (Section 37) prescribes that interest is payable @ 6% p.a. in the absence of agreement.

 Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

The correct answer is option 1-  Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

Assertion (A) is correct: In the absence of a specific agreement between partners, the Indian Partnership Act, 1932 (Section 37) does indeed mandate that interest be paid on the amount owed to the deceased partner's estate. The interest rate is typically set at 6% per annum on the outstanding balance.

Reason (R) is correct: The Partnership Act treats the unpaid amount due to the deceased partner as a loan to the firm. Since it's essentially money owed by the business, it's fair to compensate the estate with interest for the delay in payment.

** The outgoing partner’s account is settled as per the terms of partnership deed i.e., in lumpsum immediately or in various installments with or without interest as agreed or partly in cash immediately and partly in installment at the agreed intervals. In the absence of any agreement, Section 37 of the Indian Partnership Act, 1932 is applicable, which states that the outgoing partner has the option to receive either interest @ 6% p.a. till the date of payment or such share of profits which has been earned with his/her money (i.e., based on capital ratio). Hence, the total amount due to the retiring partner which is ascertained after all adjustments have been made is to be paid immediately to the retiring partner. In case the firm is not in a position to make the payment immediately, the amount due is transferred to the retiring Partner’s Loan Account, and as and when the amount is paid it is debited to his account.