Question

Jaspal and Rosy were partners with capital contribution of $Rs.10,00,000$ and $Rs.5,00,000$ 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 a Partnership Deed, the provisions of the Partnership Act, 1932 apply. According to the Act, if there is no agreement between the partners, the profits and losses of the firm are shared equally among all the partners. Hence, Jaspal's view of distributing the profits according to the capital ratio is unacceptable and Rosy must have convinced him by stating the provisions of the Partnership Act, 1932.