Accountancy Part AAccounting for Partnership

Which of the following statement is incorrect?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → The method of settlement of dispute among the partner cannot be part of the partnership deed.

A partnership deed is the written agreement among the partners, and it can cover any matter that affects their relationship, including how disputes among them will be settled.

Option (1) Valid partnership can be formulated even without a written agreement between the partners. — A true statement. The agreement may be oral or written; a written deed is advisable but not required.
Option (2) Each partner will share profit in same proportion as other in case partnership deed is not there. — A true statement. Without a deed, profits and losses are shared equally, whatever the capitals.
Option (3) Maximum number of partners as prescribed by Central Government can be 50. — A true statement. The Central Government has fixed the limit at 50 under Section 464 of the Companies Act, 2013.

NCERT (2026-27 edition):
Test your Understanding – I

Extract from the NCERT textbook

NCERT (2026-27 edition):
Provisions of Partnership Act Relevant for Accounting – “… (a) Profit Sharing Ratio: If the partnership deed is silent about the profit sharing ratio, the profits and losses of the firm are to be shared equally by partners, irrespective of their capital contribution in the firm.”