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JAMB Principles of Accounts 2014 Question 40

Question 40

Partnership Accounts

In the absence of a partnership deed, the act stipulates that

  1. A.an amount should be fixed as salary for partners.
  2. B.interest on partners loan should be 25%.
  3. C.interest should not be allowed on partners drawings.
  4. D.profits and losses should not be shared equally.
Show the answer and explanation

Answer: C (interest should not be allowed on partners drawings.)

Explanation

Without a deed the Partnership Act applies: profits are shared equally, no salaries, no interest on capital or drawings, and 5% on partners' loans.