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in Accounting for Partnership – Basic Concepts by (25.6k points)
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Sanu and Manu are in partnership, who have not made any written agreement. Sanu has given a loan of Rs. 12,000/- to the firm in addition to his capital contribution. During the year the firm made a net loss of Rs. 40,000. Regarding the interest on loan, Manu is of the opinion that no interest be paid being the loan was not external one. Is Mr. Manu right in his stand? State your views.

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Normally partnership deed contains rules and regulations regarding the conduct of partnership business. In such cases partnership may not have a written agreement. In some other firms, partnership deed may be silent on some matter. 

Then relevant discussion in the IPA 1932 becomes applicable. As per IPA 1932, interest on loan is payable at 6% p.a. on Partner’s loan. So Manu’s opinion that interest on loan is not payable, is wrong.

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