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Home Questions R6N5MTTNMN
Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the codes provided below-
Assertion: Interest on Loan by Partner is allowed at the agreed rate of interest and in the absence of agreement, it is allowed @ 8%.
Reasoning: In the absence of Partnership Deed, interest on Loan by Partner is not allowed.

Options:

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

Both Assertion (A) and reasoning (R) are correct and but R is not the correct explanation of A.

Assertion (A) is true but Reasoning (R) is not correct.

Both A and R are incorrect.

Correct Answer:

Both A and R are incorrect.

Explanation:

If partnership deed is silent in respect of certain aspects, the relevant provisions of the Indian Partnership Act, 1932 become applicable. 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. Hence both A and R are incorrect.

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