When the Partnership Deed Is Silent: Interest, Salary, Drawings, and Profit Sharing

Some partnership questions are difficult not because they give too much information, but because they give too little.

The question may say that A and B are partners. It may give their capital balances, drawings, profit for the year, and maybe even say that one partner worked more than the other. Then it quietly adds the most important line:

The partnership deed is silent.

This one line changes the whole answer.

Many students try to fill the silence with guesses. They allow interest on capital because capital is given. They give salary to the working partner because it feels fair. They divide profit in capital ratio because the capital amounts are unequal. They charge interest on drawings because drawings are given.

In Accountancy, that is exactly where marks are lost.

This guide explains those rules slowly, with examples, so that you know exactly what to allow, what not to allow, and what to do when the question gives incomplete information.

What Does a Silent Partnership Deed Mean?

A partnership deed is the agreement between partners. It may mention how profits and losses will be shared, whether interest on capital is allowed, whether interest on drawings will be charged, whether a partner will receive salary or commission, and how partner loans will be treated.

When the deed is silent about an item, it means the agreement does not give any instruction for that item.

Silent does not always mean there is no deed at all. Sometimes a deed exists, but it does not mention a particular point.

For example:

Wording in the question	What it means
”There is no partnership deed”	Apply default rules for all relevant matters
”The deed is silent about interest on capital”	Do not allow interest on capital
”The deed gives profit sharing ratio but is silent about salary”	Use the given ratio, but do not allow salary
”The deed allows salary but says nothing about drawings interest”	Allow salary, but do not charge interest on drawings

This is why you should not rush through the question. Underline what is given, then mark what is not given.

The Default Rules at a Glance

Here is the table every partnership student should know well.

If the deed is silent about	Default treatment
Profit sharing ratio	Profits and losses are shared equally
Interest on capital	Not allowed
Interest on drawings	Not charged
Partner salary	Not allowed
Partner commission or bonus	Not allowed
Interest on partner’s loan	Allowed at 6 percent per annum

This table looks simple, but its application is where the real learning happens.

The most important habit is this: do not allow an item just because the question gives a number connected with it.

Capital balances do not automatically mean interest on capital.

Drawings do not automatically mean interest on drawings.

Hard work by one partner does not automatically mean salary.

Unequal capital does not automatically mean unequal profit sharing.

Rule 1: Profit and Losses Are Shared Equally

If the partnership deed is silent about the profit sharing ratio, partners share profits and losses equally.

This applies even when their capital contributions are different.

Suppose A brings Rs. 2,00,000 as capital and B brings Rs. 1,00,000. The firm earns a profit of Rs. 60,000. The deed is silent about the profit sharing ratio.

Many students divide profit in the ratio of capital, 2:1. That would give A Rs. 40,000 and B Rs. 20,000.

But that is not correct.

Since the deed is silent about the ratio, the profit is divided equally:

Partner	Share of profit
A	Rs. 30,000
B	Rs. 30,000

The same rule applies to losses. If there is a loss and no profit sharing ratio is given, all partners bear it equally.

Rule 2: Interest on Capital Is Not Allowed

Interest on capital is the return allowed to partners on the capital they have contributed.

But it is not automatic.

If the deed is silent about interest on capital, no interest on capital is allowed.

This remains true even if:

• the capital balances are given
• the capitals are unequal
• one partner has brought much more capital than another
• the firm has earned a large profit
• the question gives opening capital balances

Capital is needed for preparing capital accounts. It does not, by itself, create a right to interest.

So the distribution is:

Partner	Interest on capital	Share of profit
A	Nil	Rs. 40,000
B	Nil	Rs. 40,000

This may feel unfair at first because A has brought more capital. But Accountancy follows the agreement first. If the agreement is silent, the default rule applies.

When Interest on Capital Is Mentioned

Now let us separate two situations.

If the deed is silent, interest on capital is not allowed.

If the deed specifically allows interest on capital, then it is allowed according to the deed.

But there is another important point: interest on capital is normally an appropriation of profit. This means it is allowed out of available profit, unless the question clearly says it is a charge against profit.

Suppose A and B have capitals of Rs. 1,00,000 each. The deed allows interest on capital at 10 percent per annum. Profit before interest is Rs. 12,000.

Interest on capital should be:

A = Rs. 1,00,000 x 10 percent = Rs. 10,000
B = Rs. 1,00,000 x 10 percent = Rs. 10,000
Total interest = Rs. 20,000

But available profit is only Rs. 12,000.

If the question does not say that interest is a charge, the available profit is used for interest on capital. Since both partners have equal interest amounts, they receive Rs. 6,000 each.

No further profit remains for distribution.

This is a common place where students mix up rules. A silent deed means no interest on capital at all. A deed that allows interest creates a different situation.

Rule 3: Interest on Drawings Is Not Charged

Drawings are amounts withdrawn by partners for personal use.

Interest on drawings is charged from partners only when the deed provides for it or the question clearly instructs it.

If the deed is silent, no interest on drawings is charged.

This remains true even if the question gives:

• monthly drawings
• drawings on specific dates
• total drawings during the year
• beginning or ending drawings
• equal or unequal drawings

Drawings reduce the partner’s capital or current account, but interest on drawings is a separate adjustment. It needs an instruction.

Suppose A withdrew Rs. 60,000 during the year and B withdrew Rs. 30,000. The question says nothing about interest on drawings.

The treatment is simple:

Partner	Drawings	Interest on drawings
A	Rs. 60,000	Nil
B	Rs. 30,000	Nil

Do not calculate interest just because dates are given. Dates matter only when interest on drawings is to be charged.

If the question says interest on drawings is to be charged at 10 percent per annum, then calculate it. If it says nothing, write nil.

Rule 4: Partner Salary Is Not Allowed

Partner salary is allowed only when the partnership deed provides for it or the question clearly gives the instruction.

If the deed is silent, no partner is entitled to salary for taking part in the business.

This rule can feel surprising because in real life one partner may manage the shop, meet customers, handle accounts, or spend more time in the business. But in a partnership accountancy question, effort alone does not create salary.

The agreement must allow it.

Suppose A manages the firm full time and B contributes capital but does not take part in daily operations. The firm earns profit of Rs. 72,000. The deed is silent about salary and profit sharing ratio.

The correct treatment is:

Item	Treatment
Salary to A	Not allowed
Profit sharing ratio	Equal
A’s profit share	Rs. 36,000
B’s profit share	Rs. 36,000

Do not write salary simply because A worked more.

The same logic applies to partner commission and partner bonus. If the deed is silent, they are not allowed.

Rule 5: Partner’s Loan Is the Important Exception

Interest on partner’s loan is often confused with interest on capital, but the two are very different.

Capital is the partner’s ownership contribution. Loan is money lent by a partner to the firm beyond capital.

If the deed is silent about interest on capital, no interest on capital is allowed.

But if a partner has given a loan to the firm and the rate is not given, interest on partner’s loan is allowed at 6 percent per annum.

This is the important exception.

Item	If deed is silent
Interest on capital	Not allowed
Interest on partner’s loan	Allowed at 6 percent per annum

Why is this different?

Because interest on partner’s loan is treated as a charge against profit. It is a cost of borrowing money. It is recorded in the Profit and Loss Account, not as a normal distribution of profit among partners.

Suppose A gives a loan of Rs. 50,000 to the firm on 1 October. The books close on 31 March. The deed is silent about the interest rate.

The loan is outstanding for 6 months.

Interest on loan = Rs. 50,000 x 6 percent x 6/12
                 = Rs. 1,500

This interest is allowed even if the firm has a loss, because it is a charge against profit.

How to Solve a Silent Deed Question

Use this order every time.

Step 1: Read the Whole Question First

Do not start calculating as soon as you see profit, capital, or drawings.

First mark:

• partner names
• capital balances
• drawings
• profit or loss
• profit sharing ratio, if any
• salary, commission, or bonus condition, if any
• interest on capital condition, if any
• interest on drawings condition, if any
• partner loan, if any
• whether the deed is silent fully or only about a particular item

This first reading prevents most mistakes.

Step 2: Separate Given Items From Silent Items

Make a small working note like this:

Item	Given or silent?	Treatment
Profit sharing ratio	Silent	Equal
Interest on capital	Silent	Not allowed
Salary	Given for A	Allow A’s salary
Interest on drawings	Silent	Not charged
Partner loan	Loan given, rate silent	Allow 6 percent per annum

This table takes less than a minute, but it can save the entire answer.

Step 3: Decide What Goes to Profit and Loss Account

Interest on partner’s loan is a charge against profit. It goes to the normal Profit and Loss Account.

That means it is handled before final profit is distributed among partners.

If profit is already given after all expenses, check whether the question expects you to adjust partner loan interest separately. If it gives profit before charging loan interest, deduct loan interest first.

Step 4: Prepare Profit and Loss Appropriation Logic

After net profit is ready, move to profit appropriation.

In the appropriation stage, allow only the items that are permitted:

• interest on capital, if allowed
• partner salary, if allowed
• partner commission or bonus, if allowed
• interest on drawings, if required
• transfer to reserve, if instructed
• final profit or loss share in the correct ratio

If the deed is silent about all these items, the account becomes very simple. The profit is divided equally.

Step 5: Post to Capital or Current Accounts

Finally, record the effect in partners’ Capital Accounts or Current Accounts.

The usual direction is:

Item	Effect on partner’s account
Share of profit	Credit
Share of loss	Debit
Interest on capital	Credit, if allowed
Partner salary	Credit, if allowed
Interest on drawings	Debit, if charged
Drawings	Debit

If capitals are fixed, regular adjustments usually go to Current Accounts. If capitals are fluctuating, they usually go to Capital Accounts.

Solved Case 1: Unequal Capital, Silent Deed

A and B are partners. Their capitals are Rs. 2,00,000 and Rs. 1,00,000. Profit for the year is Rs. 90,000. The deed is silent about profit sharing ratio and interest on capital.

What should be done?

First, do not allow interest on capital.

Second, do not divide profit in capital ratio.

Since the deed is silent about profit sharing ratio, the profit is shared equally.

Partner	Interest on capital	Profit share
A	Nil	Rs. 45,000
B	Nil	Rs. 45,000

The capital amounts are relevant for the Capital Accounts, but not for profit division unless the question says so.

Solved Case 2: Working Partner Wants Salary

A, B, and C are partners. A manages the business. The firm earns profit of Rs. 1,20,000. A claims salary of Rs. 30,000 because he manages the firm. The deed is silent about salary and profit sharing ratio.

What should be done?

Salary to A is not allowed.

Profit is shared equally because no profit sharing ratio is given.

Partner	Salary	Profit share
A	Nil	Rs. 40,000
B	Nil	Rs. 40,000
C	Nil	Rs. 40,000

A may be doing more work, but the accountancy treatment depends on the agreement.

Solved Case 3: Drawings Are Given but No Interest Rate

A and B are partners. A withdrew Rs. 5,000 per month and B withdrew Rs. 3,000 per month. Profit for the year is Rs. 72,000. The deed is silent about interest on drawings and profit sharing ratio.

What should be done?

Do not charge interest on drawings.

Profit is shared equally.

Partner	Drawings	Interest on drawings	Profit share
A	Rs. 60,000	Nil	Rs. 36,000
B	Rs. 36,000	Nil	Rs. 36,000

The monthly pattern of drawings does not matter because no interest is to be charged.

Solved Case 4: Partner Loan With Silent Interest Rate

A and B are partners sharing profits equally. A gives a loan of Rs. 80,000 to the firm on 1 July. The books close on 31 March. The deed is silent about interest on partner’s loan.

What should be done?

Interest on partner’s loan is allowed at 6 percent per annum.

Time from 1 July to 31 March is 9 months.

Interest on loan = Rs. 80,000 x 6 percent x 9/12
                 = Rs. 3,600

This Rs. 3,600 is treated as an expense of the firm. It is not divided among partners. It is credited to A because A gave the loan.

The remaining profit, after charging this interest if required by the question, will be shared equally by A and B.

The Most Common Mistakes

Mistake 1: Dividing Profit in Capital Ratio

Students often think unequal capital means unequal profit.

That is not true unless the question says so.

If the deed is silent about the profit sharing ratio, profit and loss are shared equally.

Mistake 2: Allowing Interest on Capital Automatically

Capital given in the question does not mean interest on capital is allowed.

Interest on capital needs a deed condition or a clear instruction.

If the deed is silent, write nil.

Mistake 3: Charging Interest on Drawings Just Because Dates Are Given

Some questions give dates of drawings to test whether you will calculate interest without checking the condition.

Dates matter only when interest on drawings is to be charged.

If the deed is silent, no interest on drawings is charged.

Mistake 4: Giving Salary to the Active Partner

A partner may work more, but salary is still not automatic.

If salary is not mentioned, do not allow it.

Mistake 5: Treating Partner Loan Like Capital

Partner loan and partner capital are different.

Interest on capital is not allowed when the deed is silent.

Interest on partner’s loan is allowed at 6 percent per annum when the rate is not given.

Mistake 6: Applying One Silent Rule to Everything

Sometimes the question gives one instruction but is silent about another.

For example, it may say profits are shared in 3:2, but say nothing about interest on capital. In that case, use 3:2 for profit sharing, but do not allow interest on capital.

Do not treat the whole question as silent if only one item is missing.

A Quick Decision Test Before You Finalise the Answer

Before writing the final answer, ask these questions:

Question	If answer is no or silent
Is profit sharing ratio given?	Share equally
Is interest on capital allowed?	Do not allow
Is interest on drawings required?	Do not charge
Is partner salary or commission allowed?	Do not allow
Is there a partner loan?	Allow 6 percent interest if rate is silent
Is interest on capital called a charge?	If not, treat it as out of profits

This table is especially useful in long questions where several adjustments are mixed together.

How to Write the Working Notes Neatly

Working notes should be short, but clear.

For a silent deed question, you can write:

Working Note:
In the absence of agreement:
1. Profits and losses are shared equally.
2. Interest on capital is not allowed.
3. Interest on drawings is not charged.
4. Partner salary or commission is not allowed.
5. Interest on partner's loan is allowed at 6 percent per annum.

Then apply only the points that are relevant to the question.

Do not copy the whole rule list if the question asks only one point. But in a full practical question, a neat working note helps the examiner see your logic.

How This Helps in Bigger Partnership Chapters

Silent deed rules do not disappear after the first partnership chapter.

They come back in:

• profit and loss appropriation questions
• capital account questions
• past adjustment questions
• admission of a partner
• retirement of a partner
• death of a partner
• dissolution basics

For example, in a past adjustment question, the firm may have wrongly allowed interest on capital even though the deed was silent. You must reverse that mistake.

In a capital account question, the question may give drawings but no interest rate. You must record drawings, but not interest on drawings.

In a retirement question, profit sharing ratio may be missing for an old period. You may need to use the equal ratio if the agreement is silent.

So this topic is not a small theory table. It is a rule system that protects many later answers.

A Simple Memory Line

If you want one memory line, use this:

Read that line slowly. The exception is partner loan.

Most wrong answers happen because students remember the first half and forget the exception, or remember the exception and apply it to capital.

Keep capital and loan separate, and the topic becomes much easier.

Frequently Asked Questions

What happens if the partnership deed is silent about profit sharing ratio?

Profits and losses are shared equally among the partners. Do not divide them in capital ratio unless the question clearly says so.

Is interest on capital allowed when the deed is silent?

No. Interest on capital is not allowed when the deed is silent. Capital balances alone are not enough to allow interest.

Is interest on drawings charged when the deed is silent?

No. Interest on drawings is not charged unless the partnership deed or the question clearly provides for it.

Can a partner get salary if the partner works more than others?

Not automatically. Partner salary is allowed only when the deed provides for it or the question gives a clear instruction. If the deed is silent, salary is not allowed.

Is partner commission allowed when the deed is silent?

No. Partner commission and partner bonus are treated like agreed partner remuneration. If there is no agreement or instruction, they are not allowed.

What is the rate of interest on partner’s loan if no rate is given?

If a partner has given a loan or advance to the firm and no rate is given, interest is allowed at 6 percent per annum.

Is interest on partner’s loan the same as interest on capital?

No. Interest on capital relates to ownership capital and is not allowed when the deed is silent. Interest on partner’s loan relates to money lent by a partner to the firm and is allowed at 6 percent per annum when the rate is not given.

If the deed gives a profit sharing ratio but is silent about interest on capital, what should I do?

Use the given profit sharing ratio for distributing profit or loss, but do not allow interest on capital. Treat each item separately.

If drawings are given with dates, should I calculate interest on drawings?

Only if the question says interest on drawings is to be charged. If the deed is silent, the dates do not matter for interest.

What is the biggest exam trap in silent deed questions?

The biggest trap is assuming adjustments that are not written. Do not allow salary, commission, interest on capital, or interest on drawings unless the question permits them. Use equal profit sharing when the ratio is not given, and remember the special rule for partner’s loan.