Sarthaks Test
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In the absence of a partnership deed, the provisions of the Indian Partnership Act, 1932, apply. According to the Act, if there is no agreement regarding the interest on drawings withdrawn by the partners, then no interest on drawings is charged from any of the partners. Therefore, in this situation, Jatinder’s view of charging interest on drawings is not acceptable, and Sunil must have convinced him stating the provisions contained in the Partnership Act, 1932.

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At the time of change in the profit-sharing ratio, on one hand, some partners gain, while on the other hand, some partners sacrifice. Therefore, to avoid putting any partner to an undue advantage or disadvantage, any balance available in the form of accumulated profits and losses is transferred to the Partners’ Capital Accounts in their old profit-sharing ratio. So, the balance of Rs.1,00,000 (General Reserve) will be credited to the capital accounts of Manpreet and Jaspreet in the ratio of 3:2. Manpreet must have stated the above accounting practice to Jaspreet to convince her.

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