What are the rules in the absence of a partnership deed?
Are you looking for the rules and provisions in the absence of partnership as given in class 12 Accountancy CBSE Board? I have summed up all rules if there is only verbal agreement among partners.
Provisions applicable in the absence of Partnership Deed
In the absence of a partnership Deed or if the partnership Deed is silent on a certain point. following Provisions of the Indian Partnership Act 1932 would apply.
1. Profit Sharing Ratio:- Profits and Losses are to be shared equally irrespective of their capital contribution.
2. Interest on Capital:- No interest on capital is allowed to the partners.
3. Interest on Drawings:- No Interest is to be charged on drawings.
4. Remuneration to a Partner:- No partner is entitled to any salary and commission for taking an active part in day-to-day business affairs.
5. Interest on Loan of Partner:- On any loan given by the partner to the firm. Interest @6% p.a. would be allowed even if there are losses to the firm.
6. Admission of a partner:- To admit a new partner all existing partners’ consent is mandatory.
7. Interest on Loan to Partner by Firm:- No Interest is charged on any loan given by the firm to the partner.
Important Provisions of the Indian Partnership Act, 1932
| i) | If all the partners agree, a minor may be admitted for the benefit of partnership. | [Sec – 30] |
| 2) | A person may be admitted as a partner either with the consent of all the existing partners or in accordance with an agreement among the partners. | [Sec – 31] |
| 3) | A partner may retire from the firm either with the consent of all the other partners or in accordance with an agreement among the partners | [Sec – 32] |
| 4) | Registration of the firm under the Partnership Act, 1932 is optional and not compulsory. | [Sec – 69] |
| 5) | Unless otherwise agreed by the partners in the Partnership Deed, a firm is dissolved on the death of a partner. | [Sec – 35] |
Practice Questions (MCQs)
What is the default profit-sharing ratio among partners in the absence of a partnership deed?
(a) Based on capital contribution
(b) Equally among all partners
(c) Proportional to the number of partners
(d) Decided by the senior-most partner
Ans:- (b)
If a partnership deed is silent, what happens to interest on partners’ capital?
(a) Interest is allowed @6% per annum
(b) Interest is allowed only in case of profits
(c) No interest on capital is allowed
(d) Interest is deducted from profits before distribution
Ans:- (c)
What is the provision regarding interest on drawings in the absence of a partnership deed?
(a) Interest is charged @6% per annum
(b) Interest is charged only for significant drawings
(c) No interest is charged on drawings
(d) Interest is charged unless drawings exceed profits
Ans:- (c)
Which of the following is true about remuneration to partners under the Indian Partnership Act, 1932?
(a) Partners are entitled to remuneration based on their contribution
(b) Partners are entitled to commission in case of profits
(c) No remuneration is allowed to partners unless agreed otherwise
(d) Remuneration is allowed only for inactive partners
Ans:- (c)
Under the Indian Partnership Act, 1932, what is the interest rate on loans given by partners to the firm?
(a) No interest is allowed
(b) Interest @5% per annum is mandatory
(c) Interest @6% per annum is allowed even in case of losses
(d) Interest is subject to profits and losses
Ans:- (c)
What is required for admitting a new partner into the firm in the absence of a partnership deed?
(a) Consent of the majority of partners
(b) Consent of senior partners only
(c) Consent of all existing partners
(d) Approval from the registrar
Ans:- (c)
If a firm provides a loan to a partner, what is the interest charged on the loan in the absence of a partnership deed?
(a) Interest @6% per annum is mandatory
(b) No interest is charged on loans to partners
(c) Interest is charged subject to financial profits
(d) Interest is charged @5% per annum during losses
Ans:- (b)
What happens to profit sharing if the capital contributions of partners are unequal but there is no partnership deed?
(a) Profits and losses are shared equally
(b) Profits are distributed based on capital contribution
(c) Losses are borne equally, but profits follow the capital ratio
(d) The partner with the highest capital gets the largest share
Ans:- (a)
Which statement about interest on capital aligns with the Indian Partnership Act, 1932, in the absence of a partnership deed?
(a) Interest is allowed only to dormant partners
(b) Interest is calculated as per market rates
(c) No interest on capital is allowed
(d) Interest is subject to future agreement
Ans:- (c)
What determines the rights of partners when there is no partnership deed or when it is silent on certain provisions?
(a) Partnership Act of 2005
(b) Indian Partnership Act, 1932
(c) Business guidelines from the Ministry of Finance
(d) Consent of all partners involved
Ans:- (b)
Assertion (A): Profits and losses are shared equally among partners in the absence of a partnership deed.
Reason (R): The Indian Partnership Act, 1932 mandates equal profit sharing irrespective of capital contribution.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Ans:- (a)
Assertion (A): Interest on capital is always allowed in a partnership.
Reason (R): Interest on capital depends on the agreement among partners or the partnership deed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Interest on drawings must be charged in the absence of a partnership deed.
Reason (R): The Indian Partnership Act, 1932 does not require charging interest on drawings unless explicitly agreed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Partners are entitled to a salary for managing the business in the absence of a partnership deed.
Reason (R): No remuneration is allowed to partners unless specified in the partnership deed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Interest @6% per annum is allowed on loans given by partners to the firm, even during losses.
Reason (R): The Indian Partnership Act, 1932 treats loans from partners differently from capital contributions.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Ans:- (a)
Assertion (A): Consent of all existing partners is mandatory for admitting a new partner.
Reason (R): Unanimous consent ensures the protection of existing partners’ rights and obligations.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (a)
Assertion (A): Interest is charged @6% per annum on loans given by the firm to partners.
Reason (R): The Indian Partnership Act, 1932 prohibits charging interest on loans provided by the firm to partners unless agreed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Profit-sharing depends on capital contribution if there is no partnership deed.
Reason (R): The Indian Partnership Act, 1932 specifies equal profit-sharing in the absence of a deed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Partners can claim interest on capital even if the partnership deed is silent.
Reason (R): Interest on capital is not allowed in the absence of specific provisions in the partnership deed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): The Indian Partnership Act, 1932 provides default provisions for partnerships in the absence of a partnership deed.
Reason (R): The Act ensures clarity and fairness in situations where the partnership deed is silent.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (a)
Under Section 30 of the Indian Partnership Act, 1932, which condition must be fulfilled to admit a minor for the benefit of partnership?
(a) Consent of the senior-most partner
(b) Consent of all partners
(c) An agreement among majority partners
(d) Approval from the registrar of firms
Ans:- (b)
What does Section 31 of the Indian Partnership Act, 1932 state regarding the admission of a new partner?
(a) A new partner can join without consent of existing partners
(b) A new partner can only be admitted with the consent of all existing partners or through an agreement among them
(c) Admission is conditional upon capital contribution
(d) No new partner can be admitted under the Act
Ans:- (b)
Which of the following is required for a partner to retire from the firm as per Section 32 of the Indian Partnership Act, 1932?
(a) Consent of all other partners or in accordance with an agreement among them
(b) Approval from a majority of partners
(c) Notice to the registrar of firms
(d) Contribution to partnership profits
Ans:- (a)
What does Section 69 of the Indian Partnership Act, 1932 state about the registration of a firm?
(a) Registration is mandatory for all firms
(b) Registration is optional and not compulsory
(c) Registration is mandatory for partnerships with minors
(d) Registration must occur within one year of formation
Ans:- (b)
Under Section 35 of the Indian Partnership Act, 1932, what happens to a firm upon the death of a partner if there is no agreement otherwise in the partnership deed?
(a) The firm is dissolved
(b) The remaining partners continue automatically
(c) The deceased partner’s share is transferred to their legal heirs
(d) The firm must re-register
Ans:- (a)
What is the legal condition for admitting a minor into a partnership under the Indian Partnership Act, 1932?
(a) A minor must contribute capital
(b) A minor can be admitted only for the benefit of partnership with all partners’ consent
(c) A minor can only join in profit-sharing agreements
(d) Admission requires approval from the court
Ans:- (b)
Which of the following provisions in the Indian Partnership Act, 1932 governs the retirement of partners?
(a) Section 30
(b) Section 32
(c) Section 35
(d) Section 69
Ans:- (b)
What is the significance of Section 69 regarding firm registration under the Indian Partnership Act, 1932?
(a) It mandates compulsory registration for tax compliance
(b) It declares registration optional but encourages it for legal protection
(c) It requires registration to admit minors into partnerships
(d) It states that unregistered firms are invalid under the Act
Ans:- (b)
If no agreement exists between partners, what is the default provision regarding the dissolution of a firm upon a partner’s death as per the Indian Partnership Act, 1932?
(a) The firm continues with surviving partners
(b) The firm is dissolved
(c) The deceased partner’s share is distributed among the remaining partners
(d) The firm must revise the agreement immediately
Ans:- (b)
Under Section 31, a person can be admitted as a partner based on which condition?
(a) Consent of the senior partners only
(b) Majority vote among partners
(c) Consent of all existing partners or in accordance with a prior agreement
(d) Approval from the registrar of firms
Ans:- (c)
Assertion (A): A minor can be admitted into a partnership under the Indian Partnership Act, 1932.
Reason (R): Section 30 states that a minor can be admitted for the benefit of partnership if all partners agree.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Ans:- (a)
Assertion (A): A person can join a partnership without the consent of existing partners.
Reason (R): Section 31 requires either the consent of all existing partners or an agreement among them for admitting a new partner.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): A partner can retire without consulting other partners.
Reason (R): Section 32 of the Indian Partnership Act, 1932 allows a partner to retire only with the consent of all other partners or as per an agreement.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Registration of a partnership firm is compulsory under the Indian Partnership Act, 1932.
Reason (R): Section 69 states that registration of a firm is optional and not compulsory.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): A firm is automatically dissolved on the death of a partner.
Reason (R): Section 35 of the Indian Partnership Act, 1932 provides for dissolution unless otherwise agreed in the partnership deed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (a)
Assertion (A): A minor can be a full partner in the firm as per Section 30 of the Indian Partnership Act, 1932.
Reason (R): A minor can only be admitted for the benefit of partnership and not as a full partner.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): A partner can retire only with a majority vote from the other partners.
Reason (R): Section 32 allows a partner to retire either with the consent of all partners or as per an existing agreement.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Partnership registration is required for legal enforcement of rights among partners.
Reason (R): Section 69 specifies that while registration is optional, it is advisable for protecting legal rights.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (a)
Assertion (A): A partnership firm is dissolved only on mutual consent of all partners.
Reason (R): As per Section 35, a firm is dissolved automatically on the death of a partner unless otherwise agreed.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
Assertion (A): Section 31 allows admission of a new partner through majority voting among existing partners.
Reason (R): Consent of all existing partners or agreement among them is necessary for admitting a new partner.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is false, but R is true.
(d) A is true, but R is false.
Ans:- (c)
