0Fundamentals of partnership:
A partnership comes into existence by an agreement. This agreement can be verbal or written. When two or more individuals enter into a partnership and sign a written agreement specifying the terms and condition of carrying out business together, such written document is called Partnership Deed.
The following are the important terms you will come accross in partnership chapters-
1. Salaries to partner: Remuneration paid to partners.
2. Commison paid to partner: A sum apart from salary paid to a partner (can be a fixed amount or a percentage of sales).
3. Interest on capital: Interest paid to a partner on capital contributed by such partner in the firm.
4. Interest on Drawings: Interest paid by the partner to firm on drawings.
5. Profit/Loss sharing ratio: The ration in which partners share the profits or losses of the business.
6. Interest on Loan: Interest paid/payable by the firm on loan given by the partner to the firm.
Now, the rates for the above are generally provided in the Partnership deed, however, in case there is:
- Absence of deed or
- The deed is silent on the rate of above
- The following shall be the treatment
1. Salaries to partner: No Salaries.
2. Commison paid to partner: No commision.
3. Interest on capital: No Interest on capital.
4. Interest on Drawings: No Interest on drawings.
5. Profit/Loss sharing ratio: Profit/losses shall be shared equally between partners.
6. Interest on Loan: Interest shall be paid at 6% per annum to the partner.
Therefore, in case there is no partnership deed or it does noit provide for any of the said benefits to or from partners, then only interest on loan shall be provided to partners. No salary, commission, interest on capital, interest on loan.
