Question

Consider the following statement.

Statement 1: "Partner is entitled to claim any interest on the amount of capital contributed by him in the firm as a matter of right".

Statement 2: "Interest can be allowed when it is expressly agreed to by the partners".

Options

• Only statement 1 is correct.

• Only statement 2 is correct.

• Both the statement is correct.

• None of these

Answer 1

Only statement 2 is correct.

Explanation:

As a matter of right, no partner is entitled to receive interest on the amount of capital he contributed to the firm. Interest can be allowed, though, if the partners openly agree to it. If the partnership deed is silent on the subject, no interest on capital is due.