Question

In the absence of an agreement to the contrary, the partners are_________.

• A. entitled to $6$% interest on their capitals, only when there are profits
• B. entitled to $9$% interest on their capitals, only when there are profits
• C. entitled to interest on capital at the bank rate, only when there are profits
• D. not entitled to any interest on their capitals

Answer 1

The correct option is D not entitled to any interest on their capitals

Capital is contributed by the partner when starting the business based on which the profit sharing ratio may be decided.

However, in absence of any agreement, partners are not entitled to interest on capital.

And if the agreement allows, there is a limit on the interest on capital as per the Act.