T.S. Grewal Class 12 Chapter 1 Q.2 - Accounting for Partnership Firm Fundamentals

Question 2

Mahesh, Ramesh and Suresh are partners in a firm but they do not have a Partnership Deed. The following disputes have arisen among them. State how each dispute will be settled:

1. Mahesh, who has contributed more capital, demands interest on capital @ 10% p.a.
2. Ramesh devotes full time to the business and demands a salary of ₹5,000 per month.
3. Suresh has advanced a loan of ₹1,00,000 to the firm and claims interest @ 12% p.a.
4. Mahesh demands that profit be shared in the ratio of capital contributed, whereas Ramesh and Suresh want it shared equally.

Solution

As there is no Partnership Deed, the provisions of the Indian Partnership Act, 1932 will apply:

Dispute	Settlement	Reason
(a) Interest on capital	Not allowed	No agreement exists for interest on capital.
(b) Salary to Ramesh	Not allowed	No partner is entitled to salary without an agreement.
(c) Interest on Suresh’s loan	Allowed @ 6% p.a. (not 12%)	The Act allows interest on a partner’s loan @ 6% p.a.
(d) Division of profit	Equally among all three	Profit is shared equally irrespective of capital.