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If the partnership deed contains no provision for interest on capital, what will be the effect?

Answer and explanation

Correct answer: No interest on capital will be allowed to any partner

The key point is that partners’ rights (including interest on capital) depend on the partnership deed. If the deed is silent about interest on capital, partners are not entitled to interest — so option A is correct. Option B is wrong because interest at a specified rate applies only if the deed expressly states that rate. Option C is incorrect because there is no automatic 10% rule. Option D is incorrect because paying interest out of profits requires a provision or agreement; silence does not create that right. Exam tip: always read the deed first; if it is silent, apply the default rules under partnership practice or the Partnership Act provisions.

Related tags

Interest On CapitalPartnership DeedPartnership AccountsAccountancyClass 12Partnership Accounts Basic ConceptsClass 12 Mcq

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