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If interest on drawings is not provided how will it be treated in profit distribution?

Answer and explanation

Correct answer: It will not be charged

Interest on drawings is not an automatic charge in every partnership. It can be imposed only when the partnership deed expressly provides for it, or when the partners otherwise have a valid agreement requiring it. The rate, method, and timing must come from that authority. If the deed is silent and no separate agreement exists, the firm should not invent a rate or calculate interest merely because drawings were made.

Therefore, option A is correct: interest on drawings will not be charged. A rate of 6 percent cannot be assumed, and neither the profit-sharing ratio nor the capital ratio supplies a rate by itself. The important rule is to follow the agreed terms rather than add an unsupported adjustment to profit distribution.

Related tags

Interest On DrawingsDeed SilentDefault Rule

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