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The partnership deed states that A will get interest on capital but B will not. Is this arrangement valid?

Answer and explanation

Correct answer: Yes — valid if the deed clearly provides for it.

Partners are free to agree unequal terms in the partnership deed. If the deed expressly provides that A will receive interest on capital and B will not, that provision is valid provided it does not contravene any statutory law. Option B is incorrect because there is no requirement that all partners must receive equal interest — equality arises only under default rules when the deed is silent. Option C is incorrect since paying interest on capital is not inherently illegal for partnerships; it depends on the deed and applicable law. Option D gives a useful caveat (statutory/tax compliance) but does not change the core rule that a clear deed agreement governs. Exam tip: always check the deed first — default partnership rules apply only when the deed is silent or ambiguous.

Related tags

Partnership DeedInterest On CapitalPartnership AccountsPartnership LawPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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