ICANFinancial AccountingPartnership Accounts2022

Under the Partnership Act 1890 (applicable in Nigeria in the absence of a partnership deed), which of the following statements correctly reflects the default rule regarding partners' entitlements?

APartners share profits equally and are entitled to interest on capital at 5% per annum
BPartners share profits equally and are not entitled to interest on capital before profits are ascertainedCORRECT
CPartners share profits in proportion to their capital contributions and are entitled to a salary
DPartners share profits equally and are entitled to a reasonable salary for services rendered
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
Under the Partnership Act 1890, in the absence of an agreement to the contrary, partners share profits and losses equally regardless of capital contributed. The Act does not grant any partner a right to interest on capital or a salary before profits are determined unless expressly agreed. Options A, C, and D introduce entitlements not provided by the default rules of the Act.
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →

Practice more Financial Accounting questions

ICAN Financial Accounting has thousands more questions like this — with Worked answers on every one.

Start practicing free →See all Financial Accounting questions