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Get complete step-by-step solutions for T.S. Grewal ISC Class 12 Accountancy - Chapter 1 - Fundamentals of Partnership. Study double-entry system details, practice timed problems, and verify answers directly.
Ramesh, Mahesh, and Suresh are partners since 1st April 2025 but do not have a Partnership Deed. They introduced capitals of ₹ 10,00,000, ₹ 8,00,000 and ₹ 6,00,000 respectively. Mahesh introduced further capital of ₹ 4,00,000 on 1st October 2025. Whereas Suresh advanced ₹ 4,00,000 to the firm on 1st October 2025. Business of the firm is being carried from the premises owned by Ramesh for a yearly rent of ₹ 1,20,000. Disputes have arisen among them on the following issues:
(i) Mahesh wants that he should be paid interest @ 10% p.a. on his additional capital as his capital is more than the other partners.
(ii) Ramesh wants that he should be paid a salary of ₹ 10,000 per month as he is devoting some time to the business.
(iii) Suresh wants that he should be allowed interest on loan at the lending rate of the banks, which is 12% p.a.
(iv) Ramesh has withdrawn ₹ 1,00,000 from the firm for his personal use. Mahesh and Suresh want that Ramesh should be charged interest on his drawings @ 10% p.a.
(v) Mahesh wants the profit should be shared by the partners in the ratio of capital.
You are required to give solutions to each issue of dispute.
Note: Provisions of the Indian Partnership Act, 1932 that apply when there is no Partnership Deed: no interest on capital (s. 13); no salary or commission to a partner for taking part in the business (s. 13(a)); interest on a partner's loan to the firm at 6% p.a. (s. 13(d)); no interest on drawings; profits shared equally (s. 13(b)); a new partner cannot be admitted without the consent of all the partners (s. 31).
| Issue | Decision | Reason |
|---|---|---|
| (i) Interest on Mahesh's additional capital @ 10% | Not allowed — no interest on capital | In the absence of an agreement no interest is payable on capital, whatever the amount. |
| (ii) Ramesh's salary of ₹ 10,000 per month | Not allowed | A partner is not entitled to a salary unless the Partnership Deed provides for it. |
| (iii) Suresh's loan interest at 12% | Allowed only at 6% p.a. = ₹ 12,000 for the 6 months | Interest on a partner's loan is payable at 6% p.a., not at the bank rate (₹ 4,00,000 × 6% × 6/12). |
| (iv) Interest on Ramesh's drawings of ₹ 1,00,000 | Not charged | Interest on drawings can be charged only if the Partnership Deed says so. |
| (v) Profit sharing in the ratio of capital | Profits are shared equally | Equal sharing is the rule when there is no agreement, irrespective of capital. |
Note: The rent of ₹ 1,20,000 a year payable to Ramesh for the use of his premises is not in dispute: it is a contract between Ramesh and the firm and is charged to the Profit and Loss Account.
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.