Based on following, answer the question.
Mr. A, Mr. B and Mrs. C are friends, graduated from JIM Calcutta with specialisation in finance. They started a financing business as a partnership firm. In a written Partnership Deed they specify that the profit sharing ratio amongst them would be 3 : 2 : 1 and interest on capital would be provided @ 5% p.a. However no specifications were made in partnership deed about the interest on drawings and loans. The capitals contributed by them were ₹3,00,000, ₹2,00,000 and ₹1,00,000 by A, B and C respectively. During the year Mrs. C withdrew ₹20,000 to meet her family expenses. Looking at insufficient capital Mr. B introduced another ₹1,00,000 as capital into the firm on 1st June 2021. The business was expanding and for the same purpose the firm took a loan from Mr. A of ₹3,00,000 on 1st October 2021. During the year ended 31 March, 2022 firm earned a profit of ₹4,00,000 before charging rent of ₹20,000 p.a. Looking at the competency of Mr. D being a C.A. Mr. B wanted to introduce him in the partnership firm as a partner. The firm started its operation on 1st April 2021.
Mrs. C withdrew ₹20,000 to meet her family expenses. What amount of interest on drawings will be charged from her?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → No interest on drawings will be charged
The deed makes no provision for interest on drawings. When the deed is silent, the Partnership Act applies and no interest is charged on drawings.
Option (1) ₹20,000 — Incorrect. This is the amount of drawings itself, not interest on it.
Option (2) ₹1,200 (being 6% p.a.) — Incorrect. The 6% rate of the Act applies to a partner's loan to the firm, not to drawings.
Option (3) ₹2,000 (being 10% p.a.) — Incorrect. No rate is fixed in the deed, so no interest can be charged at any rate.
NCERT (2026-27 edition):
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