Accountancy Part AAccounting for Partnership

In the absence of partnership deed which of the following rules is fo…

In the absence of partnership deed which of the following rules is followed :

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Profits and Losses are shared equally

When there is no partnership deed, or the deed is silent, the Indian Partnership Act, 1932 applies. Under it, profits and losses are shared equally, whatever the capital contributed.

Option (1) Interest on Capital is allowed @ 6% p.a. — Incorrect. No interest on capital is allowed without an agreement.

Option (2) Interest on drawing are charged @ 6% p.a. — Incorrect. No interest is charged on drawings without an agreement.

Option (4) Profits and Losses are shared according to capital contribution — Incorrect. Profits are shared equally, irrespective of capital contribution.

Note: 6% p.a. is the rate allowed by the Act on a partner’s loan to the firm, not on capital or drawings.

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.”