Which of the following is correct?
The important provision affecting partnership accounting, in the absence of a partnership deed is:
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Interest on Drawings: No interest is to be charged on the drawings made by the partners, if there is no mention in the Deed.
Interest on Drawings: No interest is to be charged on the drawings made by the partners, if there is no mention in the Deed is correct. If the partnership deed does not mention anything about charging interest on drawings made by partners, no interest will be levied on such withdrawals.
OTHER OPTIONS
- 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 by partners in their capital ratio. IT IS FALSE as profit is shared equally.
- Interest on Capital: Partner is entitled to claim higher interest on the amount of capital contributed by him in the firm as a matter of right. IT IS FALSE as no interest on capital is provided.
- Interest on Loan: If any partner has advanced loan to the firm for the purpose of business, he/she shall be entitled to get an interest on the loan amount at the rate of 16 per cent per annum. IT IS FALSE as interest on loan is provided @ 6% p.a.