The partnership deed provides for charging interest on a deficiency in a partner’s capital. On whom will this interest be charged?

Correct answer: The partner whose capital is deficient

The governing concept is that a partner’s capital deficiency is a personal account-related matter, not an expense to be shared by outsiders or unrelated parties. If the partnership deed specifically states that interest is chargeable on a deficiency in a particular partner’s capital, the amount is debited to that partner’s Capital Account or Current Account, according to the accounting arrangement. Thus, the partner whose capital is deficient bears the interest. Customers, the bank and the government have no accounting responsibility for this internal adjustment. Therefore, option A is correct. The deed is important because, in the absence of such a specific provision, this charge cannot ordinarily be imposed merely by assumption.