Answer to Question #206135 in Accounting for twinkle

Question

1.    The partnership Act governs partnerships and states the rights and duties of partners. The Act includes the following provision which is important and apply to partnerships unless the partners have agreed to vary the terms

a.     All partners are entitled to contribute equally to the capital of the partnership

b.    Partners are entitled to interest on the capital they have contributed

c.     Partners are to be charged interest on their drawings.

d.    Partners are not entitled to interest on loans they make to the partnership

 

Answer 1

The partnership Act stipulates among others when there are varying agreements to the provisions of the Act that:

1. Profits shall be shared equally
2. Interests shall not be allowed (charged) on partner's capital (drawings)
3. Interest shall be allowed o partner's loans of up to 5% per annum
4. No partner shall be entitled to receive salary.

From the foregoing, it could be seen that even when there are disagreements among the partner's on what to do or not to do when there are no rules or provisions guiding the affairs of the business, there are certain stipulated rules which shall be binding on all.

The above answer therefore is D:

Partners are not be entitled to interest on loans they make to the partnership. Option (d)