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A is entitled to a commission of 20% on the net profit after charging such commission. The profit before charging the commission is ₹96,000. What will be the profit remaining after the commission?

Answer and explanation

Correct answer: ₹80,000

Since the commission is calculated on profit after charging the commission, let the remaining profit be ₹x. Then commission = 20% of x, so the total profit before commission is x + 0.20x = 1.20x. Therefore, 1.20x = ₹96,000 and x = ₹96,000 × 100/120 = ₹80,000. ₹76,800 would result from calculating 20% on the profit before commission, so it is incorrect. Exam tip: For commission after charging, remaining profit = profit before commission × 100/(100 + commission rate).

Related tags

Partnership AccountsCommission After ChargingProfit AdjustmentsNet ProfitPartnership AccountingAdjustmentsPartnership Accounts Basic ConceptsAccountancy

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