Question : In the absence of a partnership deed, Interest on capital
Option 1: is allowed @ 6% p.a.
Option 2: is allowed @ 10% p.a.
Option 3: is allowed at the borrowing rate.
Option 4: is not allowed
Correct Answer: is not allowed
Solution :
Answer =
is not allowed.
In the absence of a partnership deed, no interest is allowed to partners on capital. In the absence of a partnership deed specifying otherwise, interest on capital cannot be allowed because there is no agreed-upon provision for such compensation. Without a partnership agreement outlining terms, partners lack the framework to determine and allocate interest on capital.
Hence, the correct option is 4.
