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CA Foundation · Accounting · Partnership and LLP Accounts

Asha and Bhavna are partners with no partnership deed provision on interest. Asha advanced a loan of ₹2,00,000 to the firm during the year, for the full year. Under the default rule, what interest is payable to Asha on this loan for the year?

Interest on a partner's loan to the firm is payable at 6% per annum when the deed is silent. On ₹2,00,000 for a full year this equals ₹12,000, and it is charged to the profit and loss account as an expense.

  1. A₹10,000
  2. B₹12,000Correct
  3. C₹14,000
  4. DNil, since interest is paid only on capital

Explanation

Where the deed is silent, a partner's loan to the firm carries simple interest at 6% p.a. So interest = 2,00,000 x 6% = ₹12,000. The 5% figure would give ₹10,000, which is wrong because 5% applies to no default rule here.

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