Question

Which of the following is correct? The important provision affecting partnership accounting, in the absence of a partnership deed is:

• 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 by partners in their capital ratio.
• B. 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.
• C. Interest on Drawings: No interest is to be charged on the drawings made by the partners, if there is no mention in the Deed.
• D. 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 annum.

Hint:

In absence of a partnership deed: Profits/losses shared equally, no interest on capital/drawings, but 6% interest allowed on partner's loan.

Answer 1

The Correct Option is C

Step 1: Standard provisions in absence of partnership deed. According to the Indian Partnership Act, 1932, if there is no partnership deed: - Profits and losses are shared equally, not in capital ratio. - No interest on capital is allowed as a matter of right. - No interest is charged on drawings. - If a partner gives a loan to the firm, he is entitled to 6% interest, not 16%.

Step 2: Checking the options.
- Option 1 is wrong → profits/losses shared equally, not in capital ratio.
- Option 2 is wrong → no right to interest on capital unless agreed.
- Option 3 is correct → no interest on drawings if deed is silent.
- Option 4 is wrong → interest on loan is 6%, not 16%.

Final Answer: \[ \boxed{\text{No interest is to be charged on drawings (Option 3)}} \]