Profit Distribution

As five ninth share in remaining profit is Rs 100000. Adding salary and commission gives total claim Rs 160000.

This is a sequential appropriation problem: salary is deducted first, then commission is calculated on the remaining profit. Remaining profit = 380000 − 50000 = 330000. B’s commission = 20% of 330000 = 0.2×330000 = 66000, so A is correct. Common mistake: taking 20% of the total profit (20% of 380000 = 76000, option B) — incorrect because salary must be deducted first. Exam tip: follow the order of appropriation given in the question (salary → commission → distribution).

After salary and commission remaining profit is Rs 360000. Third partners three twelfth share is Rs 90000.

The direct answer is A: interest on drawings is treated as a credit item in the Profit and Loss Appropriation Account. Drawings are amounts withdrawn by a partner for personal use. Interest on drawings is charged to that partner, so it is income or a recovery for the firm. Income is credited in the appropriation account. This treatment applies even when the firm has an overall loss, provided that the partnership deed clearly requires interest on drawings. Option A is correct because the amount increases the credit side of appropriation. Option B is wrong because a loss does not automatically cancel a clearly agreed charge. Option C is wrong because interest on drawings is not an expense of the firm; it is recoverable from the partner. Option D is wrong because interest on capital is a separate item, normally a charge or appropriation in favour of partners, not the same as interest on drawings. Exam cue: drawings interest comes from the partner to the firm, so remember “drawings interest—credit.”

Interest on drawings is a credit for the firm and reduces the loss. Therefore distributable loss will be Rs 67500.

Due to the special deed clause interest is treated like expense. Loss becomes Rs 70000 plus Rs 35000 equal to Rs 105000.

After salary remaining profit is Rs 165000. Cs normal share is Rs 55000 so deficiency is Rs 25000.

If the firm meets a partner's guaranteed shortfall, the amount reduces the total distributable profit and the remaining profit is divided among partners in their profit‑sharing ratio. Therefore A's and B's final shares will be reduced. Options B and C are incorrect because drawings and interest on capital are separate items unaffected directly by meeting a guarantee; option D is wrong because meeting the shortfall does affect other partners' shares. Exam tip: Treat guarantee deficiency met by the firm as a reduction in distributable profit and allocate the impact to other partners in their agreed ratio when preparing the appropriation of profit.

Total claim is Rs 105000 and As share is three fifths. Three fifths of available profit is Rs 50400.

Total credit = Rs 380000 + Rs 22000 = Rs 402000. Remaining profit = total credit − total debits = Rs 402000 − Rs 150000 = Rs 252000. Sum of ratio = 4+3+2 = 9. Second partner’s share =
\(252000\times\dfrac{3}{9}=252000\times\dfrac{1}{3}=\)Rs 84,000. Closest distractor Rs 112,000 equals the first partner’s 4/9 share; Rs 56,000 equals the third partner’s 2/9 share; Rs 252,000 is the whole remaining profit. Exam tip: Always adjust net profit for items on the credit side (like interest on drawings) and debit side first, then divide the resulting balance by the stated ratio.

Excess credit may mean profit is not yet distributed. In final profit distribution appropriation account is debited.

Under old ratio B got Rs 108000. Under new ratio B should get Rs 150000 so B is credited by Rs 42000.

A was paid Rs 96,000 but should have received Rs 84,000, so he has received an excess of Rs 12,000 (96,000 − 84,000 = 12,000). To correct this, A’s account must be debited by Rs 12,000 to reverse the excess payment. The nearest distractor (Credit Rs 12,000) is wrong because crediting A would increase his balance instead of reducing the excess; “No effect” is incorrect because an adjustment is required. Exam tip: compute received minus entitled for each partner — debit the partner who received excess, credit those who were short.

In such questions order and second effect change the answer. Match total available profit and partner wise claims after every step.