Mohan and Shyam are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:

(i) Mohan is an active partner. He wants a salary of ₹10,000 per year;

(ii) Shyam had advanced a loan to the firm. He claims interest @ 10%

Question

Mohan and Shyam are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:

(i) Mohan is an active partner. He wants a salary of ₹10,000 per year;

(ii) Shyam had advanced a loan to the firm. He claims interest @ 10% per annum;

(iii) Mohan has contributed ₹20,000 and Shyam ₹50,000 as capital. Mohan wants equal share in profits.

(iv) Shyam wants interest on capital to be credited @ 6% per annum.

Accepted Answer

> [!TLDR]
> When the deed is silent, the Indian Partnership Act, 1932 decides everything: no salary, no interest on capital, equal profit sharing regardless of capital, and a fixed 6% p.a. on a partner's loan. Only claim (iii) — Mohan's equal share — is valid as stated.

### Concept

The Act's default rules apply automatically whenever the partnership deed doesn't address a matter: profits/losses are shared **equally** (never in proportion to capital); **no** partner earns a salary or remuneration for firm work; **no** interest is allowed on capital; but a partner's **loan** to the firm (distinct from capital) always earns interest, fixed at **6% p.a.**

### Solution

**(i) Mohan wants a ₹10,000 salary — Not valid.** No partner is entitled to salary or remuneration for taking part in the business unless the deed expressly provides for it, even for an active, full-time partner.

**(ii) Shyam claims 10% interest on his loan — Not valid as claimed.** A partner's loan does earn interest under the Act, but at a fixed 6% p.a. — not whatever rate the partner asks for.

**(iii) Mohan wants an equal profit share despite contributing less capital (₹20,000 vs Shyam's ₹50,000) — Valid.** The Act presumes equal sharing of profits and losses when the deed is silent, entirely independent of how much capital each partner contributed.

**(iv) Shyam wants 6% interest on capital — Not valid.** Interest on capital is never automatic; it is payable only if the deed expressly agrees to it — the fact that 6% happens to be the Act's loan-interest rate is irrelevant here, since this claim is about capital, not a loan.

> [!ANSWER]
> Only (iii) is valid. (i) and (iv) fail outright; (ii) is valid only in substance — Shyam does earn loan interest, but at 6% p.a., not 10%.

Item	Debit	Credit
Interest on Capital	Profit & Loss Appropriation A/c	Partner’s Capital/Current A/c
Partner’s Salary	Profit & Loss Appropriation A/c	Partner’s Capital/Current A/c
Partner’s Commission	Profit & Loss Appropriation A/c	Partner’s Capital/Current A/c
Interest on Drawings	Partner’s Capital/Current A/c	Profit & Loss Appropriation A/c
Share of Profit	Profit & Loss Appropriation A/c	Partner’s Capital/Current A/c
Share of Loss	Partner’s Capital/Current A/c	Profit & Loss Appropriation A/c

Particulars	Amount (₹)	Particulars	Amount (₹)
To Interest on Capital:		By Net Profit (transferred from P&L A/c)	XXX
Partner A	XXX	By Interest on Drawings:
Partner B	XXX	Partner A	XXX
To Partner’s Salary:		Partner B	XXX
Partner A	XXX
To Partner’s Commission:
Partner B	XXX
To Profit transferred to:
Partner A’s Capital A/c	XXX
Partner B’s Capital A/c	XXX
Total	XXX	Total	XXX

Claim	Valid?
(i) Mohan wants a ₹10,000 salary	No — no partner earns salary unless the deed provides for it
(ii) Shyam claims 10% loan interest	No — he's entitled to interest, but only at the Act's fixed 6% p.a.
(iii) Mohan wants an equal share despite lower capital	Yes — the Act presumes equal sharing regardless of capital contributed
(iv) Shyam wants 6% interest on capital	No — interest on capital is never a right; it needs the deed's express agreement

Option	Provision (Sec. 13)	Allowed?
(A) Interest on Capital	13(c)	No
(B) Profits/losses in capital ratio	13(b)	No — shared equally
(C) Interest @ 6% p.a. on loans/advances	13(d)	Yes
(D) Remuneration for firm's work	13(e)	No

Date	Particulars	Debit (Rs)	Credit (Rs)
2025 Mar 31	Interest on Alok's Loan A/c Dr.	3,000
	To Alok's Loan A/c		3,000
	(Interest due on Alok's loan @ 6% p.a. for 3 months)

Q.Mohan and Shyam are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:

Concept understanding — Partnership Deed Definition

Everyday Intuition

Precise Meaning (as per NCERT Class-12 Accountancy)

Why It Matters in Accounting

Accounting Treatment

Key Rules (NCERT-based):

Format of Profit and Loss Appropriation Account (as per NCERT)

Formula for Interest on Capital

Final Takeaway

Concept

Solution

Part (a)

Part (b)

Concept and Accounting Treatment

Solution

Journal Entry (for recording interest due)

Q.Mohan and Shyam are partners in a firm. State whether the claim is valid if the partnership agreement is silent in the following matters:

Concept

Solution

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