ICAEW AF · Chapter 12 · Question 7 of 11
Under the Partnership Act 1890, which of the following applies when the partners have made no agreement about the sharing of profits?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Profits and losses are shared equally, and no partner is entitled to a salary or interest on capital
Explanation
In the absence of an agreement, the Partnership Act 1890 provides that profits and losses are shared equally. No partner is entitled to a salary or to interest on capital, and no interest is charged on drawings. A partner who lends money to the firm beyond their capital is entitled to interest on that loan at 5% per year.
More Financial statements of sole traders and partnerships MCQs
- Q9A trader does not keep full records. Trade receivables were £6,800 at the start of the year and £7,950 at the end. During the year £92,400…
- Q10Rhys and Sian are partners with a 31 December year end. Until 30 June they shared profits equally. From 1 July they agreed to share…
- Q11A sole trader's records show: revenue £210,000; cost of sales £128,000; operating expenses £47,500; interest on a business loan £1,200…
- Q1A sole trader's capital at the start of the year was £45,000. During the year the owner introduced a further £5,000, took cash drawings of…
- Q2A trader's inventory was destroyed and closing inventory must be estimated. Sales for the year were £150,000, and the trader always sells…