Sometimes the Partnership Agreement May Specify That Interest Is to Be

question 15

Multiple Choice

Sometimes the partnership agreement may specify that interest is to be charged on partner's drawings.Which of the following is the main reason for such a charge?

• A)To reduce partnership profits
• B)To act as a disincentive to partners withdrawing excessive amounts from the partnership
• C)To reward partners
• D)To encourage partner's to draw extra amounts

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Definitions:

Net Advantage to Leasing

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CCA Class

refers to the Capital Cost Allowance Class, a categorization used in Canadian tax to determine the depreciation rate for tax purposes on assets.

Annual Depreciation

The method of allocating the cost of a tangible asset over its useful life on a yearly basis.

Cost of Debt

The effective rate that a company pays on its total debt, reflecting the expense of borrowing funds.