Profit Distribution

Correct answer: B. Current Account

The governing concept is the fixed-capital method of maintaining partners’ accounts. Under this method, the balance of each partner’s capital account is intended to remain unchanged except when the agreed permanent capital is introduced or withdrawn. Regular adjustments such as partner salary, interest on capital, interest on drawings, drawings, and the share of profit or loss are consequently recorded in a separate current account. Therefore option B is correct. The capital account is not normally used for these recurring appropriations under the fixed-capital method. Trading Account is concerned with gross profit from trading operations, while Bank Account records receipts and payments; neither is the appropriate personal account for these partner adjustments.

Correct answer: A. Rs 16,000

The available profit is insufficient to meet the total claims in full. The total claim is Rs 20,000 salary + Rs 30,000 interest on capital = Rs 50,000. When the deed gives no order of priority, the available profit is distributed between these claims in proportion to their amounts. Salary represents 20,000/50,000, or 2/5, of the total claims. Therefore, the proportionate salary is 2/5 × Rs 40,000 = Rs 16,000. The remaining Rs 24,000 goes toward interest on capital. Option B ignores the insufficiency, while the other amounts do not follow the proportional calculation.

Correct answer: A. Sixty thousand rupees

Distributable profit is one lakh sixty thousand plus eight thousand minus thirty thousand minus eighteen thousand minus twenty thousand equal to one lakh. A share is three fifths which is sixty thousand rupees.

Correct answer: B. Interest will be allowed proportionately up to twenty thousand

Interest on capital is normally appropriation and cannot exceed available profit. If profit is lower allow interest proportionately.

Correct answer: A. Ten thousand rupees

For commission after charging commission use profit times rate divided by one hundred plus rate. One lakh ten thousand times ten divided by one hundred ten equals ten thousand.

Correct answer: B. Fifteen thousand rupees

The direct answer is Option B: Rs 15,000. The phrase ‘commission on profit before charging commission’ means the base is the full profit before deducting commission. Compute 20% of Rs 75,000: \\(20/100 \\times 75,000 = Rs 15,000\\). Therefore A’s commission is Rs 15,000. Option B is correct. Option A, Rs 12,500, would result from a different base or an incorrect calculation. Option C, Rs 18,750, is not 20% of Rs 75,000 and may arise from an unsuitable reverse formula. Option D, Rs 60,000, is 80% of the profit, not the commission. The common mistake is using the formula for commission after charging commission; here the question clearly says before charging commission.

Correct answer: A. Zero rupees

C actual share is five tenths of two lakh which is one lakh rupees. Since actual share is more than guarantee there is no deficiency.

Correct answer: A. Twelve thousand rupees

C actual share is twenty thousand so deficiency is twenty thousand. Shared by A and B in three to two makes A deduction twelve thousand.

Correct answer: A. A eighteen thousand and B twelve thousand

After salary and interest remaining profit is thirty thousand. In three to two ratio A gets eighteen thousand and B gets twelve thousand.

Correct answer: B. Sixteen thousand rupees

Available profit before appropriations includes interest on drawings. Ten percent of one lakh sixty thousand is sixteen thousand rupees.

Correct answer: A. Ten thousand rupees

A reserve is created before the commission in the stated order. The original profit is ₹1,20,000, and ₹20,000 is transferred to the reserve first. The amount left for the stated commission is therefore ₹1,00,000. The commission rate must then be applied to this remaining amount, not to the original profit before the reserve.

The calculation is: remaining profit = ₹1,20,000 − ₹20,000 = ₹1,00,000. A’s commission = 10% of ₹1,00,000 = ₹10,000. Hence option A follows directly. A commission of ₹12,000 would result from incorrectly applying ten percent to the full original profit, ignoring the instruction that the reserve must be created first.

Correct answer: A. A charge against profit is treated as appropriation

Interest on partner loan is an expense before calculating profit. Show it in Profit and Loss Account not Appropriation Account.

Correct answer: A. Thirty five thousand rupees

Equal share gives B forty five thousand and deficiency is ten thousand. It is deducted from A so A final profit is thirty five thousand.

Correct answer: A. Fifty five thousand rupees

B actual share is forty five thousand so deficiency is five thousand. A actual share was sixty thousand and after bearing deficiency it becomes fifty five thousand.

Correct answer: A. Loss of ten thousand rupees will arise

Such clause makes interest on capital a charge against profit. Deducting sixty thousand from fifty thousand profit creates loss of ten thousand.

Correct answer: A. About seven thousand two hundred twenty seven rupees

After salary the base is eighty thousand rupees. Since commission is after charging commission eighty thousand times ten divided by one hundred ten is about seven thousand two hundred twenty seven.

Correct answer: A. Nine thousand rupees

Available profit is forty four thousand plus four thousand minus twelve thousand equal to thirty six thousand. B one fourth share is nine thousand rupees.

Correct answer: A. Twenty five thousand rupees

C is exempt from losses so A and B share loss in two to two which is equal. A share is twenty five thousand rupees.

Correct answer: B. Loss after appropriations

If debit side is higher the balance is treated as loss. Debit it to partners in applicable loss or profit ratio.

Correct answer: B. Allow salary only forty eight thousand

The partnership deed places a special limit on A’s salary: it is payable only to the extent of available profit. The firm has a net profit of Rs 48,000, while the stated salary is Rs 60,000. Since the available profit is smaller than the agreed salary, the amount actually allowed cannot exceed Rs 48,000. The excess Rs 12,000 is not treated as an additional loss merely to pay the full salary.

Therefore option B is correct. The entire available profit is used to allow A’s salary, so A receives or is credited with Rs 48,000 under this condition. Option A ignores the limiting clause in the deed and would create a loss, which the clause prevents. Option C incorrectly treats the salary as completely unavailable, and option D ignores the specific salary provision and does not follow the stated agreement.

Correct answer: B. Commission will not be allowed or will be deferred as per deed

If deed gives an order the earlier item gets priority. If no profit remains the later appropriation may not be allowed.

Correct answer: B. Distributable profit will be understated

Interest on drawings should be credited but debiting it makes available profit appear lower. Difference from correct position can be double.

Correct answer: C. Rs 6,000

Let commission be \(C\) rupees. Profit before commission is \(56000\), so profit after charging commission is \(56000 - C\). Given commission is \(12\%\) of profit after commission: \(C = 0.12(56000 - C)\). \(C = 6720 - 0.12C\) ⇒ \(1.12C = 6720\) ⇒ \(C = 6000\). So commission is \(\text{Rs }6000\).

Correct answer: A. About fifty three thousand one hundred forty three rupees

B commission is seven thousand and remaining profit is ninety three thousand. A share is four sevenths which is about fifty three thousand one hundred forty three.

Correct answer: A. Appropriation process was bypassed

Reserve is first created through Profit and Loss Appropriation Account. Direct debit to capital accounts misstates profit distribution presentation.