Why is the profit sharing ratio written in a partnership deed?

Correct answer: To share profit and loss

The direct answer is A: the profit-sharing ratio is written to share profit and loss among the partners. A partnership involves more than one owner, so the deed should state how the business result will be divided. If partners agree to a ratio such as 2:1, a distributable profit of ₹30,000 would give ₹20,000 to one partner and ₹10,000 to the other, after considering any required adjustments. Unless a different agreement or applicable rule is stated, the agreed ratio is also commonly used for sharing losses. Option A is correct because it identifies the purpose of the ratio. Option B is wrong because the ratio does not exist merely to sell goods; buying and selling are business operations, not the division rule. Option C is wrong because the ratio is not written only for saving tax, and it cannot guarantee tax reduction. Option D is wrong because salary is a separate matter and may be fixed in the deed; the profit-sharing ratio does not mean “only to pay salary.” The ratio gives each partner’s agreed economic share. Exam cue: profit-sharing ratio answers “in what proportion will partners share the result?”