Profit Distribution

First adjust all appropriations and incomes to find available profit. Then apply profit sharing ratio.

Remaining profit is transferred from Profit and Loss Appropriation Account to partners accounts. First complete appropriations then distribute the balance.

When profit ratio is given profit is shared by that ratio. Use capital ratio only if the question says so.

Total parts = 1 + 4 = 5. One part = 50,000 ÷ 5 = 10,000 rupees, so A's share = one part = 10,000 rupees. Closest distractor: 40,000 would be B's share (4 parts), not A's. Exam tip: always add the ratio parts first, divide total profit by that sum, then multiply by the required partner's parts.

Total parts in the ratio 4 : 1 : 1 = 4+1+1 = 6 parts. With total profit ₹60,000, one part = ₹60,000 ÷ 6 = ₹10,000. A's share = 4 parts = 4 × ₹10,000 = ₹40,000. The closest distractor C (₹20,000) is wrong because it equals only 2 parts, not A's 4 parts. Exam tip: always add the ratio parts first, divide total profit by that number to get one part, then multiply by the required number of parts.

Loss is shared in profit ratio if no separate loss ratio is given. If the question gives a separate loss ratio use it.

Ratio 5:2 means total parts = 5+2 = 7. One part = ₹70,000 ÷ 7 = ₹10,000. B's share = 2 parts = 2 × ₹10,000 = ₹20,000. The nearest distractor ₹50,000 is wrong and would result from mistakenly giving B 5 parts instead of 2. Exam tip: always add the ratio parts first, divide the total by that sum, then multiply by the partner's number of parts.

The direct answer is A: after allowing salary, the remaining profit is shared in the profit-sharing ratio. Salary is an appropriation of profit, not the final division of all profit. For example, if profit is Rs 100000 and salary of Rs 20000 is allowed, the remaining Rs 80000 is divided according to the agreed ratio, such as 3:2. Option A is correct because the partnership agreement determines the sharing ratio. Option B, age, is irrelevant unless an unusual agreement specifically says otherwise. Option C, bank passbook, only provides bank transaction information and cannot decide partners’ profit shares. Option D, stock list, helps determine inventory and profit but is not a basis for dividing the remaining profit. Exam cue: salary is adjusted first; the balance follows the profit ratio.

Salary and interest on capital are both deducted from profit. One lakh minus twenty thousand minus ten thousand equals seventy thousand.

Interest on drawings is added like income to the firm. Sixty five thousand plus three thousand equals sixty eight thousand.

The direct answer is Option A: the concerned partner’s account. Partner salary is not an ordinary employee expense in partnership appropriation; it is an amount allowed to a particular partner under the deed. Therefore the concerned partner’s capital account or current account is credited, depending on the accounting method. Option A is correct. Option B, customers’ account, records amounts due from customers and has no connection with partner salary. Option C, Trading Account, is used to determine gross profit and does not record this appropriation. Option D, creditors’ account, records outside parties to whom the firm owes money, not the partner’s personal remuneration. Memory cue: an amount allowed to a named partner is credited to that partner.

A partner’s commission is an amount of profit assigned to that partner under the partnership agreement. It is not an ordinary business expense incurred to earn revenue; it is an appropriation of profit. The Profit and Loss Appropriation Account shows such appropriations on its debit side, because they reduce the profit remaining for distribution among the partners. The partner’s account is then credited with the commission allowed.

Therefore option A is correct. The commission payable to a partner is debited to the Profit and Loss Appropriation Account and credited to the partner’s capital or current account. A credit-side entry in the appropriation account would generally represent items such as net profit brought from the Profit and Loss Account or other credits, not commission paid to a partner. This treatment applies when the commission is based on the partnership agreement.

Both commission and salary are payable to A and thus both amounts are credited to A's account. Total = 4,000 + 6,000 = 10,000 rupees. Option D (6,000) shows only the salary and omits the commission, so it is incorrect. Exam tip: Always add all payable items to the partner’s account to get the correct credit amount.

Equal sharing means the profit is divided into two equal parts. So each partner's share = total profit ÷ 2 = 36,000 ÷ 2 = 18,000 rupees. Option B (36,000) is incorrect because it represents the entire profit, not A's share; options C (12,000) and D (24,000) would correspond to 1/3 and 2/3 splits respectively, which are not equal shares. Exam tip: For equal partners, always divide the total profit by the number of partners (here 2).

The governing concept is equal distribution of partnership profit. Since there are three partners and the agreement says that they share equally, the total profit must be divided into three identical portions. Each partner’s share = ₹1,20,000 ÷ 3 = ₹40,000. Thus option A is correct. Option B would be the share of two equal partners combined, not one partner’s share. Option C results from an incorrect division by four, while option D gives the entire firm’s profit to each partner and therefore counts the profit three times. A useful check is to add the three individual shares: ₹40,000 + ₹40,000 + ₹40,000 = ₹1,20,000. This confirms that the full profit is distributed exactly once.

The profit ratio in deed applies even if capitals are equal. Equal capital does not automatically change profit ratio.

When deed is silent more work does not automatically change profit ratio. Profit is shared equally.

Reserve amount \(=15\%\) of \(40000\). So \(0.15\times 40000=6000\). Therefore, reserve transferred \(=\text{Rs }6000\).

Distributable profit = total profit − reserve. So ₹80,000 − ₹16,000 = ₹64,000, hence option A is correct. Option B (₹96,000) is incorrect because it adds the reserve instead of subtracting it; option C is just the reserve amount, not the distributable profit; option D is the original profit without deducting the reserve. Exam tip: Always deduct reserves and appropriations from profit before calculating amounts available for distribution among partners.

The governing concept is appropriation of profit. A reserve is created by retaining or setting aside a specified portion of the firm’s profit instead of distributing that portion immediately to the partners. Consequently, the amount of profit available for immediate distribution decreases by the amount transferred to the reserve, although the partners’ agreed profit-sharing ratio itself does not automatically change. Therefore option A is correct. Option B states the opposite effect. Option C is incorrect because creating a reserve does not cancel or alter the partnership ratio. Option D confuses reserve creation with drawings; drawings are withdrawals by partners and are recorded separately. For example, if distributable profit is ₹50,000 and ₹10,000 is transferred to reserve, only ₹40,000 remains for immediate distribution.

A minimum profit guarantee promises that partner A will receive at least Rs 20,000 as a share of profit. The actual amount first calculated for A is Rs 17,000, so the guaranteed minimum has not been reached. The deficiency is the shortfall that must be made good according to the terms of the guarantee.

To find it, subtract the actual share from the guaranteed amount: Rs 20,000 − Rs 17,000 = Rs 3,000. Thus A is short by three thousand rupees. This is not the whole actual share or the whole guaranteed amount; it is only the difference between them. Therefore option A is correct. The agreement would determine which partner or partners bear this deficiency.

The partner who gave the guarantee generally bears the deficiency. Therefore it will be deducted from B profit.

The governing concept is deficiency under a minimum profit guarantee. Deficiency arises only when the actual profit share falls below the guaranteed minimum. Here, the actual share is ₹25,000 and the guarantee is ₹20,000. Since the actual share is greater than the guaranteed amount, the guarantee has already been satisfied and no additional payment is required. Therefore the deficiency is nil, making option B correct. Option A incorrectly subtracts the guarantee from the actual share and calls the surplus a deficiency; ₹5,000 is actually the excess over the guarantee. Option C repeats the guaranteed minimum, while option D repeats the actual share. The comparison can be expressed as ₹25,000 − ₹20,000 = ₹5,000 surplus, so deficiency = ₹0.

Add interest on drawings and deduct interest on capital. Fifty thousand plus two thousand minus seven thousand equals forty five thousand.

Ratio 2:7 means total parts = 2+7 = 9. With total profit ₹9,000, one part = ₹9,000 ÷ 9 = ₹1,000. A's share = 2 parts = 2 × ₹1,000 = ₹2,000. Closest distractor B (₹7,000) is actually B's share; C (₹9,000) is the entire profit; D (₹1,000) is just one part. Exam tip: always add the ratio parts first, then divide the total to find one part before multiplying for each partner.