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Why is a partner’s salary mentioned in the partnership deed?

Answer and explanation

Correct answer: To reward special service

A partner may devote additional time, skill, or managerial effort to the firm beyond the ordinary responsibilities of partnership. If the partners agree to compensate that special service, the amount or basis of the partner’s salary should be stated in the partnership deed. It then becomes an agreed appropriation or remuneration item and can be recorded consistently in the accounts, subject to applicable rules. Option A is correct because the payment rewards extra work performed for the firm. A customer is not the intended recipient, and reducing goods prices or ending the agreement has no connection with partner salary.

Related tags

Partner SalaryRemunerationPartnership DeedPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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