Question

Jaspal and Rosy were partners with capital contribution of ₹ 10,00,000 and ₹ 5,00,000 respectively. They do not have a Partnership Deed. Jaspal wants that profits of the firm should be shared in their capital ratio. Rosy convinced jaspal that profits should be shared equally. Explain how Rosy would have convinced Jaspal for sharing the profit equally.

Answer 1

In the absence of partnership deed, the provisions of Indian Partnership Act of 1932 applies. According to the act, if there is no agreement regarding the ratio in which profits are to be shared, then profits (or losses) are to be shared equally among all the partners. Therefore, in this situation Jaspal’s view of distribution of profits in capital ratio is not acceptable and Rosy must have convinced her stating the provisions contained in the Partnership Act, 1932.