There are two statements Assertion (A) and Reason (R) :
Assertion (A) : Partnership Agreement becomes the basis of relationship among the partners.
Reason (R) : Partnership is the result of an agreement between two or more persons to do business and share its profits and losses.
Choose the correct option from the following :
There are two statements Assertion (A) and Reason (R) :
Assertion (A) : Partnership Agreement becomes the basis of relationship among the partners.
Reason (R) : Partnership is the result of an agreement between two or more persons to do business and share its profits and losses.
Choose the correct option from the following :
Options
Correct option: (A). Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).
Marking Scheme
- 11 mark: for selecting option (A) with the reasoning that R is the definitional basis explaining A.
Hint
Recall the legal definition of partnership under the Indian Partnership Act, 1932, and how it connects to the role of the Partnership Deed.
Quick Oral Answer
Both statements are true — the Partnership Deed is the written form of the very agreement that legally defines partnership under the Indian Partnership Act, 1932, so the Reason directly explains the Assertion.
Analysis & Explanation
Concept: Partnership is created by an agreement (oral, written, or implied) between two or more persons to carry on a business and share its profits and losses; when this agreement is put in writing it is called the Partnership Deed.
Why Assertion (A) is correct: The Partnership Deed lays down the mutual rights, duties and liabilities of partners (profit-sharing ratio, interest on capital/drawings, remuneration, etc.), so it becomes the basis governing the relationship among partners.
Why Reason (R) is correct and explains (A): Since partnership itself is legally defined under the Indian Partnership Act, 1932 as the relation resulting from an agreement to carry on business and share profits/losses, it is this very agreement — when documented as a deed — that fixes the terms governing the partners' relationship. Hence R correctly explains why A is true.
Why other options are wrong:
- (B) is wrong because R does explain A — it is not merely a coincidental true statement.
- (C) is wrong because R is also correct, not incorrect.
- (D) is wrong because A is correct, not incorrect.
Common Mistakes
- 1Marking (B) by assuming Assertion and Reason are both true but unrelated, without checking that R is in fact the direct explanation of A.
- 2Confusing 'Partnership Deed' with 'Partnership Agreement' as two different things — a deed is simply the written form of the agreement.
Interesting Facts
The Indian Partnership Act, 1932 does not make a written partnership deed compulsory — an oral agreement is equally valid in law, though a written deed avoids future disputes.
In the absence of a partnership deed, the Indian Partnership Act, 1932 applies default rules: profits/losses shared equally, no interest on capital, no salary to partners, and interest on loan by a partner at 6% p.a.
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Frequently Asked Questions
What happens if there is no partnership deed?
In the absence of a partnership deed, the provisions of the Indian Partnership Act, 1932 apply by default: profits and losses are shared equally, no interest is allowed on capital, no salary/commission is paid to partners, and partners' loans carry interest at 6% p.a.
Is a partnership deed compulsory?
No, it is not legally compulsory — an oral agreement is valid — but a written deed is strongly recommended to avoid disputes and to have documentary evidence of agreed terms.