Partnership deed provides that Interest on capital will be 5%. Now if Partner has a Negative Capital A/c i.e Capital A/c has a debit balance. Now will the partnership firm instead of giving 5% to partner , charge 5% from partner?
Pallavi (Student) (137 Points)
11 June 2011Partnership deed provides that Interest on capital will be 5%. Now if Partner has a Negative Capital A/c i.e Capital A/c has a debit balance. Now will the partnership firm instead of giving 5% to partner , charge 5% from partner?
SUDHIR & PRADEEP JI
(CA FINAL+LLB + DISA)
(2299 Points)
Replied 11 June 2011
If their is some provision relating to this clause in partnership deed then this will be applicable which means that if deed say that if capital is negative & thier sholud be intrest charged from the partner, then it will be otherwise not
CA ADITYA SHARMA
(CA IN PRACTICE )
(16719 Points)
Replied 11 June 2011
Akash V
(None)
(25 Points)
Replied 11 June 2011
Debit balance in the capital account would mean that "Drawings A/c" has is the same as capital account. In that case, the interest applicable will be "Interest on drawings".
NITIN S MAHAJAN
(PROPRIETOR)
(33 Points)
Replied 11 June 2011
Interest on Debit balance can charged only when specific clause is mentioned in the partnership deed.
satish kumar Chauhan
(accountant)
(346 Points)
Replied 13 June 2011
interst to be chargred accoring to your querry
ritesh
(CA)
(106 Points)
Replied 13 June 2011
hi...
i belive just because the part. deed does not has a cluase to effect drawing interest does not concludes its withholding the transaction....
if the firm is using loans to fund its operation and paying an interest over it then it should also charge for overutilisation of firms cash by its partners....
it can be observered that if the interest is paid by the firm on funds borrowed and the partner are withdrawing more then their account has then it can be considered as indirect way of borrowing funds by partners n paying interest through firm.
VIVEK
(CHARTERED ACCOUNTANT)
(34 Points)
Replied 24 June 2011
No interest can not be cherged on partner's drawings unless specifically mentioned in the partnership deed.
Vivek Naik
Aparna Raja K.C
(Student)
(520 Points)
Replied 24 June 2011
Interest on Capital will not be credited to partner's account and mean while
Interest on Drawing will be Dr . if the pertnership provides for the same :)
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