Partnership Deed

The deceased partners profit share is calculated on time basis. Last years profit and date of death are both needed.

For drawings at the beginning of each quarter, average period is seven point five months. In exams distinguish beginning and end cases.

For equal drawings at the end of each quarter, average period is four point five months. The period directly affects interest.

Direct answer: Option A, firm expense. An insurance premium paid for an asset owned and used by the firm is a business cost. First identify its purpose: it protects the firm’s asset, not a partner personally. Next identify the accounting stage: expenses are deducted while finding net profit, before profit is distributed. Therefore it is debited as a firm expense. Option A is correct because it reduces business profit. Option B is wrong because partner salary is payment for a partner’s work, not insurance. Option C is wrong because appropriation means distribution of already calculated profit, such as salary, commission or interest to partners. This premium is deducted before that stage. Option D is wrong because drawings are amounts taken by a partner for personal use. Here the payment benefits the firm’s asset. Memory cue: business benefit before profit means expense; partner benefit after profit means appropriation.

A’s commission is \(2\%\) of sales: \(\dfrac{2}{100}\times 500000=10000\). So A’s commission is \(\text{Rs }10000\).

Reduction of capital may affect the firms paying capacity. Notice condition prevents sudden capital withdrawal.

Credit sales limit controls recovery and risk of the firm. Such financial limits in the deed are useful.

The direct answer is option A: private income earned through a connection with the firm. A partner must not make a private profit by using the firm’s name, business connection, property, information, or opportunities without accounting to the firm, when the partnership agreement imposes that duty. Step by step, the earning is linked to the firm; the partner receives it personally; the deed requires such income to be brought into the firm; therefore it is treated as income accountable to the firm. Option A is correct because it directly identifies private income arising from the firm connection. Option B, interest on a personal savings account, is normally an independent personal return and is not automatically connected with the firm. Option C, inherited property, comes from inheritance, not the firm. Option D, a personal gift, comes from a donor and is not a business opportunity. The exact legal treatment depends on the deed and facts, but A is clearly the intended answer. Memory cue: no private gain from a firm opportunity without accounting to the firm.

Annual allowance is taken on time basis if no full year condition exists. For eight months, two thirds of Rs 12000 is Rs 8000.

Direct answer: Option A, equal voting rights. Profit sharing and decision-making are separate matters. A deed may allow partners to share profits unequally while expressly giving each partner one equal vote. Step by step: first identify the issue as a decision-making issue, not a profit-distribution issue; next read the deed’s voting clause; the deed says voting rights are equal; therefore each partner’s vote carries the same weight; the decision is made under that equal-vote rule, subject to any special legal or deed requirement for particular matters. Option A is correct because the stated voting provision directly governs decisions. Option B, profit ratio, determines how profit or loss is shared, but it does not automatically determine voting power when the deed says otherwise. Option C, capital ratio, might be relevant only if the agreement makes voting depend on capital, but the stated equal-vote clause rejects that basis. Option D, drawings ratio, records withdrawals and has no normal role in voting. The safe exam method is to match the question with the relevant clause instead of assuming that every partnership matter follows the profit ratio. This answer assumes the deed’s equal-voting clause is valid and no separate mandatory rule is given. Memory cue: profit ratio distributes profit; voting clause decides votes.

Training employees is related to firms business. Therefore the reimbursement may be a firm expense.

Appropriation of profit is made only when profit is available. In loss, such salary is generally not allowed.

When profit ratio is absent, capital ratio does not automatically apply. Under the general rule, profit is shared equally.

The core rule is to follow the exact wording of the partnership deed. If the deed specifies 'profit before tax', the commission must be calculated on the profit amount before provision or deduction for income tax. Therefore option A is correct. Option B (profit after tax) is incorrect because it is the net profit after tax and would apply only if the deed expressly said 'after tax' or 'after charging tax'. Options C (only cash profit) and D (capital profit) are not applicable because the deed does not mention cash-basis or capital/profit type. Exam tip: always underline phrases like 'before tax', 'after tax' or 'after charging' in the deed — those words determine the base for commission or profit-sharing.

Under the deed the partner's personal tax is not an expense of the firm but is treated as the partner's drawings. The correct journal entry on payment is: Debit Partner's Drawings Account; Credit Bank/Cash. Tax expense account is incorrect because that would be used only if the tax were an expense of the firm. Partner's capital account is a plausible distractor, but personal payments are recorded in Drawings (which ultimately reduce capital), not by debiting Capital directly. Exam tip: when the deed states a personal item is treated as drawings, always debit Drawings A/c and credit Bank/Cash on payment.

Direct answer: Option A, up to the date of death. The question gives a precise contractual limit: interest on capital is allowed up to the partner’s date of death. Step by step: identify the opening date or relevant capital balance; determine the rate stated in the deed; calculate interest for the period from the beginning of the accounting period, or another specified date, up to the actual date of death; stop the calculation on that date. The partner’s legal status and entitlement under this clause do not continue beyond the stated death date. Option A is correct because it repeats the exact endpoint required by the deed. Option B, the full next year, is wrong because the deceased partner cannot be credited under this instruction for a period beyond death. Option C, until firm closure, is wrong because closure may occur much later and is not the contractual endpoint. Option D, only up to the previous year, is wrong because the deed specifically permits calculation during the current year up to death. If a numerical question is asked, a fraction of the year may be used, for example months over twelve, when the textbook method requires it. Memory cue: for a death-year adjustment, stop at the event date, not the year-end.

The partner’s total claim has two separate parts: the salary allowed under the deed and the partner’s share of the profit remaining after that salary. First subtract the salary of ₹20,000 from the total profit of ₹95,000. This leaves ₹75,000 as the remaining profit. The deed gives A one-third of this remaining amount, so A’s profit share is ₹25,000. Salary and profit share must then be added to find the total claim.

The calculation is: remaining profit = ₹95,000 − ₹20,000 = ₹75,000; A’s share = ₹75,000 × 1/3 = ₹25,000; total claim = ₹20,000 + ₹25,000 = ₹45,000. Hence choice A is correct. The salary is not included again in the one-third calculation, because the wording says the share is in the remaining profit. The supplied answer is consistent, and the other amounts do not follow from the stated salary and ratio.

The total shortfall in the guarantee is Rs 6000 and the deed specifies that A and C will bear this shortfall equally. Therefore A’s share = Rs 6000 ÷ 2 = Rs 3000. Note: if the deed had specified a different ratio, the deficiency would be borne in that ratio. Exam tip: first check the deed for wording like 'equally' or a specific ratio — that determines how deficiency is allocated.

Direct answer: Option A, old share minus new share. Sacrifice ratio measures how much of the existing partners’ old profit share is given up to admit the new partner. Step by step: write each old partner’s old ratio; write that partner’s new ratio after admission; subtract the new share from the old share for each old partner, using the same denominator or equivalent fractions; the positive differences form the sacrificing ratio; the new partner’s gain is normally supplied by these sacrifices. Option A states this exact calculation. Option B, adding new shares, does not measure the reduction suffered by old partners and cannot by itself produce a sacrifice ratio. Option C, dividing capital by profit, mixes unrelated figures; capital may affect other calculations but is not the formula for sacrifice. Option D, subtracting drawings from capital, calculates neither a profit-share reduction nor a ratio of sacrifice. A useful check is that an old partner who gives up more of the old share should have a larger sacrifice figure. If a partner’s new share is greater than the old share, that partner may be gaining rather than sacrificing, so the facts must be checked carefully; the supplied wording asks for the standard formula. Memory cue: sacrifice equals what was old but is no longer retained: old share minus new share.

Change in profit ratio is decided by the deed or partners agreement. In exams apply the deed clause first.

Appropriations cannot exceed available profit when no special order is given. Proportionate adjustment is a safe exam approach.

Commission is calculated on profit after paying the salary. Subtract A's salary from profit before salary: \(136,000-36,000=100,000\). B's commission is 10% of that: \(10\%\times100,000=10,000\). Option B (Rs 13,600) is incorrect because it applies 10% to the profit before salary (Rs 136,000) instead of after salary. Exam tip: follow the deed sequence—adjust profit for salaries/interest first, then compute commissions or profit shares on the adjusted figure.

In dissolution, the order of settling assets and liabilities is important. The deed may clarify this order.

The direct answer is option A: interest on capital will not be allowed, assuming the deed makes minimum capital maintenance a required condition. The reasoning is conditional. First, the deed promises interest only when the partner maintains at least the specified minimum capital. Second, A’s capital is below that minimum. Third, the condition has not been fulfilled, so the contractual entitlement to interest does not arise. Option A is correct on the facts given. Option B is wrong because the deed does not promise interest unconditionally or automatically for the whole year. Option C is wrong because failing a condition cannot create double interest. Option D concerns interest on drawings; it does not answer what happens to interest on capital and is a separate matter. In real accounting, the exact entry could depend on the precise wording of the deed, but the question clearly intends denial of interest. Memory cue: when a benefit has a stated condition, check the condition before calculating the benefit.

Using the firms name privately is against the deed and trust. It may create unwanted liability for the firm.