S1: In a partnership, if a partner's loan to the firm is interest-free, and the deed is silent, no interest is allowed. S2: If the partner's loan is interest-bearing as per the deed, it is treated as a liability and interest is charged to the Profit and Loss Account. Which statement(s) is/are correct?
Explanation:
Both statements are correct. If the deed is silent, no interest on a partner's loan is allowed. If the deed specifies an interest rate, it is treated as an expense and charged to the P&L Account, not the P&L Appropriation Account.
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