what is the purpose of allowing interest on partners capital
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see if partners instead of contributing in the capital of the firm, they invest in fixed deposits of the bank then they will get the interest on some fixed rate. hence, partners expect normal rate of interest on their capital contributed also. That's why interest on the capital will be allowed.
Moreover business man are two separate legal entities, therefore, if business man contribute capital in the firm it is the liability for the firm and the firm is liable to pay interest on the amount contributed.
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