Fundamentals of Partnership

Accountancy (CUET)

Title

45:30

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Indian Economy - Understanding the basics of Indian economic system

Interest on capital will be paid to the partners if provided for in the partnership deed but only out of:

Profits

Reserves

Accumulated Profits

Goodwill

- Interest on capital is paid to partners if there's a clause in the partnership deed.

- It indicates the share of profit partners earn from their invested capital.

- The interest is generally calculated as a percentage of the capital contributed by each partner.

- Option 1: Profits - Interest is paid out of the profits of the firm.

- Option 2: Reserves - Not typically used to pay interest, unless explicitly stated.

- Option 3: Accumulated Profits - These are previously retained profits, not the usual source for current interest.

- Option 4: Goodwill - Represents brand value, not a monetary fund for paying interest.