In the absence of any provision in the partnership agreement, profits and losses are shareda)In the ratio of capitalsb)Equallyc)In the ratio of loans given by them to the partnership firmd)None of the aboveCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

Profit Sharing Ratio: If the partnership deed is silent about the profit sharing ratio, the profits and losses of the firm are to be shared equally by partners, irrespective of their capital contribution in the firm.  However, interest can be allowed when it is expressly agreed to by the partners.

Answer

B is the correct answer.

Answer

In the absence of partnership deed profit and loss of the is distributed in equal ratio

Answer

Explanation:

In the absence of any provision in the partnership agreement, the default rule is that profits and losses are shared equally among the partners. This means that each partner will receive an equal share of the profits and will bear an equal share of the losses.

Reasoning:

The reason behind this default rule of equal sharing of profits and losses is the principle of equity and fairness. When partners enter into a partnership, it is assumed that they are contributing equally to the partnership and should therefore share the benefits and burdens equally as well.

If profits and losses were shared in the ratio of capitals (option A), it would mean that partners with higher capital contributions would receive a larger share of profits and would bear a smaller share of losses. This would be unfair to partners with lower capital contributions.

Similarly, if profits and losses were shared in the ratio of loans given by them to the partnership firm (option C), it would mean that partners who have given more loans to the partnership would receive a larger share of profits and would bear a smaller share of losses. Again, this would be unfair to partners who have not given any loans or have given lesser loans.

Therefore, the default rule of equal sharing of profits and losses ensures fairness and equity among the partners. It promotes a sense of mutual trust and cooperation among the partners, as they are all equally invested in the success and failure of the partnership.

Conclusion:

In the absence of any provision in the partnership agreement, the default rule is that profits and losses are shared equally among the partners. This ensures fairness and equity in the partnership and promotes a sense of mutual trust and cooperation.

Similar CA Foundation Doubts

Under the Indian Partnership Act, 1932, in the absence of an agreement among the partners, profits of a firm shall be divided in the ratio of

In the absence of specific provisions in the Partnership Deed, every partner is bound to contribute in ________ to the losses of the firm

Which of the following statement in false?

Top Courses for CA FoundationView all

Quantitative Aptitude for CA Foundation

Accounting for CA Foundation

Business Laws for CA Foundation

Business Economics for CA Foundation

Mock Tests & Past Year Papers for CA Foundation

Top Courses for CA Foundation

Top Courses for CA Foundation

Related Content

CA Foundation Courses

Other Courses

How To Prepare?

Other Exams

Company