Case StudyRead the following information to answer.Arun and Ram are partners in a restaurant business sharing profits and losses in capital ratio. Their fixed capital from the beginning of the firm was Rs. and Rs. respectively.The profit for the year ended 31 March 2022 before the appropriation of Salary and Interest on Capital was Rs. . Ram is allowed a salary of Rs. per quarter and interest on capital @ p.a.Due to the further expansion of the business, they decided to enter Sanjeev as a new partner for share in profits. It was agreed that Sanjeev will bring Rs. as capital and Rs. as his share of Goodwill. It was decided that he will give Rs. as loan to the firm for 3 years.Rate of Interest on loan given by Sanjeev will be:
- AP.A.
- BP.A.
- CNIL
- DP.A.
Solution & Step-by-step Explanation
In the absence of an explicit partnership agreement specifying the interest rate on advances/loans provided by a partner, the provisions of the Indian Partnership Act, 1932 apply, which allow an interest rate of p.a.