Why does the deed include a clause for sharing losses besides profits?

Correct answer: To state the ratio for sharing loss

A partnership deed records the agreed basis on which partners will bear business losses, just as it records the basis for sharing profits. The loss-sharing ratio may be the same as the profit-sharing ratio, but partners can specify another arrangement if it is lawful and clearly agreed. When a loss occurs, the firm calculates the total loss and debits or allocates it among partners according to that stated ratio. Option A is correct because the clause removes uncertainty about each partner’s responsibility. The other options concern unrelated activities and do not explain the accounting purpose of the provision.