CAF-4 · Chapter 12 · Question 10 of 10
If a partner advances a loan to the firm beyond their agreed capital contribution, what is their right regarding interest on this advance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) They are entitled to interest at a statutory rate (often 6% p.a.) even if the firm suffers a loss.
Explanation
While interest on capital is not allowed unless agreed, a partner making an advance/loan beyond capital is statutorily entitled to interest (typically 6% p.a. under the Act), payable whether there are profits or not.
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