Partnership Deed

Personal purchases in the firms name may create wrong liabilities for the firm. This clause strengthens internal control.

The consent condition in the deed decides whether the expense was authorized. Unauthorized expense may be charged to the concerned partner.

20% of ₹1,00,000 = 1,00,000 × 20/100 = ₹20,000. This transfer is an appropriation of profit to the general reserve. Option B (₹10,000) reflects 10% and is a miscalculation; option C (₹50,000) is 50%; option D is the entire profit, not the prescribed percentage. Exam tip: to find 20% quickly divide the amount by 5 (₹1,00,000 ÷ 5 = ₹20,000).

Interest on capital is allowed to partners. Therefore it is debited to the Profit and Loss Appropriation Account.

The direct answer is option A: the profit remaining after commission will be shared equally among all partners. The deed creates two steps. First, partner A receives the stated 10 percent commission on profit. Second, the amount left after that commission is distributed according to the next instruction in the deed, namely equally. For example, if the profit were Rs 100, A’s commission would be Rs 10 and the remaining Rs 90 would be divided equally among the partners. The number of partners is not stated, so no individual amount can be calculated, but the sharing rule is clear. Option A is correct because the deed expressly says ‘equally’. Option B is wrong because A receives only the commission, not the entire remaining profit. Option C would apply only if a capital ratio were prescribed. Option D is wrong because drawings ratio does not control profit sharing here. Memory cue: follow the deed in order—commission first, remaining profit as instructed.

Reserves created before admission belong to old partners. The new partner gets benefit only if the deed says so.

If the machine is the partners personal asset and firm uses it rent may be a firm expense. The deed clause decides treatment.

Asset sale is a major decision and the deed may require consent. Unauthorized sale creates disputes about liability and adjustment of proceeds.

Special interest applies only to the capital and partner stated in the deed. Read it separately from the general rule.

The deed condition is binding: interest on capital is payable only when profit is available. With net profit zero, that condition is not met, so interest is not payable. Option B (creating a loss to pay interest) is not a correct accounting treatment and would contradict the deed. Options C and D describe possible arrangements if partners mutually agree (adjustment or deferral), but they do not override the deed’s explicit condition; therefore they are not the correct answer in the absence of profit or a deed amendment. Exam tip: always read deed clauses literally — phrases like “only when profit is available” prevent automatic interest payments when profit is nil.

C actual share is one fifth of one lakh which is twenty thousand. Guarantee is thirty thousand so deficiency is ten thousand.

The base stated in the deed prevails. Closing capital may include profit and drawings and may give wrong interest.

Under fixed capital method profit share goes to current accounts. Capital accounts change only for permanent capital changes.

Converting loan to capital reduces loan liability and increases partners capital. It should be done as per deed or consent.

If the deed puts responsibility on that partner his account is debited. This prevents unfair burden on other partners.

Treatment of donation depends on deed and purpose. If fixed out of profit it may be treated as appropriation.

Salary right comes from the deed so the deduction clause also applies. Carefully consider the absence period.

Partners may contribute through skill and service besides capital. Such a clause clarifies rights and profit appropriations.

Direct answer: Option A, Profit and Loss Account. First understand the rule: interest on a partner’s loan is a finance cost owed for the use of money lent to the firm. It is not a distribution of profit. Therefore it is charged against profit before the remaining profit is distributed among partners. Step by step: the partner lends money; the firm becomes liable to pay interest; the liability is treated as an expense; the expense is recorded in the Profit and Loss Account; the profit left afterward is transferred for appropriation. Option A is correct because this account records ordinary business expenses and charges against profit. Option B, Profit and Loss Appropriation Account, is used after net profit is found, for items such as interest on capital, partner salary, commission and profit sharing; it is not the proper first account for partner-loan interest. Option C, Drawings Account, records amounts taken out by a partner, not interest payable on a loan given to the firm. Option D, Goodwill Account, records the value or adjustment of business reputation, not loan interest. Exam cue: interest on partner’s loan is normally a charge against profit, while interest on capital is normally an appropriation of profit. This answer assumes the usual partnership-accounting treatment and no special deed instruction changing presentation.

For commission after charging commission multiply profit by rate and divide by one hundred plus rate. Eighty thousand times twenty by one hundred twenty gives about thirteen thousand three hundred thirty three.

For equal drawings at the beginning of each quarter average period is seven and a half months. This is often tested in harder numerical questions.

For equal drawings at quarter end average period is four and a half months. Remember beginning and end rules separately.

Interest on drawings is calculated for the period during which the partner uses the firm’s money before the end of the accounting year. If the withdrawal is made on the last day of the year and the year ends on that same day, no time remains for which interest can be charged. The amount of the drawing and the rate are relevant only when there is a chargeable period.

Here, the amount is Rs 48,000 and the rate is 8%, but the time period is zero. Using the simple idea \(\text{Interest}=\text{Amount}\times\text{Rate}\times\text{Time}\), the time factor is zero, so the interest is \(48,000\times 8\%\times 0=0\). Therefore, option A is correct; the other amounts incorrectly assume a positive period.

Direct answer: Option A, Rs 4,000, is correct. A is guaranteed a minimum profit of Rs 60,000, but A’s actual share is only Rs 52,000. First calculate the deficiency: Rs 60,000 − Rs 52,000 = Rs 8,000. The deed says B and C will bear this deficiency equally. Divide Rs 8,000 by 2: Rs 8,000 ÷ 2 = Rs 4,000. Therefore Rs 4,000 is charged to B and Rs 4,000 to C, so A receives the guaranteed amount. Option A works because it is each partner’s equal share of the shortfall. Option B is the total deficiency, not each partner’s deduction. Option C is unrelated to the difference between the guarantee and actual share. Option D is A’s actual share, not the deficiency. The key is to calculate the shortfall before applying the burden-sharing ratio. Memory cue: guaranteed profit minus actual profit gives deficiency; then divide it in the agreed ratio.

A minimum guarantee protects a partner only when their actual share is less than the guaranteed amount. If the actual share exceeds the guarantee, no deficiency arises and therefore no extra accounting adjustment is required. The common distractor (B) applies only when actual share < guarantee, in which case the shortfall is made good as per the deed or profit‑sharing ratio. Exam tip: compute the partner's actual share first and compare it with the guaranteed amount — record adjustments only when actual < guarantee.