If the deed says that profit should first be transferred to reserve and then distributed among partners, what is the first step?

Correct answer: Create or transfer the prescribed amount to reserve

A partnership deed is the governing agreement for distributing profit when it contains a specific instruction. If the deed directs that a stated amount or proportion be transferred to a reserve before distribution, that instruction must be carried out first. The reserve is created by setting aside the prescribed amount from the available profit; only the balance is then considered for appropriation among the partners according to their agreement. The step is not a deduction of an existing reserve, and there is no basis for equal sharing unless the deed says so. Drawings are withdrawals of cash or goods, not profit. Therefore, option A correctly identifies the first step.