When the partnership agreement is silent, at what annual rate is interest generally allowed on a loan advanced by a partner to the firm under the Partnership Act?
Correct answer: B. 6 percent
- A. 5 percent
- B. 6 percent
- C. 8 percent
- D. 10 percent
Explanation
A partner is generally entitled to interest at 6 percent per annum on a loan or advance made to the firm when the agreement is silent. This rule concerns a partner's loan, not interest on capital.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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