Which of the following statements are true ?
(A) Under fixed capital method, capital and current accounts are prepared.
(B) If a partner withdrew in the beginning of each month, average period is 6.5 months taken for interest calculation.
(C) No interest on capital is provided in the absence of partnership deed.
(D) In the absence of partnership deed, profits are distributed in the capital ratio.
Choose the correct answer from the options given below:
Which of the following statements are true ?
(A) Under fixed capital method, capital and current accounts are prepared.
(B) If a partner withdrew in the beginning of each month, average period is 6.5 months taken for interest calculation.
(C) No interest on capital is provided in the absence of partnership deed.
(D) In the absence of partnership deed, profits are distributed in the capital ratio.
Choose the correct answer from the options given below:
Solution
(A) True. Under the fixed capital method, the capital account stays fixed year to year (changes only with fresh capital introduced or capital withdrawn), while a separate current account records interest on capital, drawings, interest on drawings, salary, commission, and share of profit or loss.
(B) True. If a partner withdraws a fixed amount at the beginning of each month for 12 months, the average period is calculated as (12 + 1) / 2 = 6.5 months. This is the standard product method result for beginning-of-month withdrawals.
(C) True. As per the Indian Partnership Act, 1932, in the absence of a partnership deed, no interest on capital is allowed to any partner.
(D) False. In the absence of a partnership deed, profits (and losses) are shared equally among partners, regardless of their capital contribution, not in the capital ratio.
Answer: Option 1
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2022: 20 Aug Shift 2