Profit Distribution

Correct answer: A. Net profit will be wrongly reduced and the payment will not be shown separately as drawings

A partner’s personal income tax is a private expense, not a firm expense. Recording it as a firm expense overstates firm expenses and thus wrongly reduces net profit. Such payments should be posted as drawings (or debited to the partner’s capital/current account) and credited to cash/bank. The closest distractor (B) is incorrect because treating a partner’s personal tax as a firm expense does change net profit. Exam tip: always treat personal expenses paid by the firm as drawings and adjust partner accounts, not as firm operating expenses.

Correct answer: A. 9,000 rupees

The governing concept is that a salary expressly payable under the partnership deed is allowed even if it converts the reported profit into a loss. The firm begins with net profit of Rs 25,000 and must provide A’s salary of Rs 40,000. The residual is therefore Rs 25,000 − Rs 40,000 = negative Rs 15,000, meaning a loss of Rs 15,000. A and B bear this loss in the ratio 2:3, which contains five parts. B’s share is three parts: 3/5 × Rs 15,000 = Rs 9,000. Hence option A is correct. Option B is A’s two-fifths share, option C is the entire loss before allocation, and option D ignores both the deed and the loss-sharing ratio.

Correct answer: A. Fifty four thousand rupees

C commission is twenty thousand and remaining profit is one lakh eighty thousand. A three tenths share is fifty four thousand rupees.

Correct answer: A. Thirty six thousand rupees

The direct answer is A: Rs 36,000. The ratio A:B is 5:4, but A first receives a bonus equal to 10% of the profit available before distribution. Ten percent of Rs 90,000 is Rs 9,000. After paying this bonus, the balance is Rs 90,000 − Rs 9,000 = Rs 81,000. This remaining amount is divided in the ratio 5:4, so B receives 4/9 of Rs 81,000 = Rs 36,000. Option A is correct because it follows the stated bonus and ratio. Option B, Rs 40,000, does not result from 4/9 of the balance. Option C, Rs 44,000, is also not the correct fraction. Option D, Rs 90,000, ignores both the bonus and the division of the balance. Remember: calculate the bonus first, subtract it, and then apply the profit-sharing ratio.

Correct answer: B. Divide profit based on sales of each period

If sales basis is given do not apply time basis. First divide profit by sales of each period then apply the relevant ratio.

Correct answer: B. Sixty thousand rupees

Total sales are five lakh and second period share is three fifths. Therefore second period profit is sixty thousand rupees.

Correct answer: A. Drawings are treated as profit appropriation

Drawings are partner withdrawals not expenses. Only interest on drawings if any is treated separately as firm income.

Correct answer: A. Twenty thousand rupees

C actual share is forty thousand so deficiency is ten thousand. A actual share was thirty thousand and after deduction it becomes twenty thousand.

Correct answer: A. Because it is internal redistribution among partners

Guarantee deficiency does not change total profit. It only transfers amount from one partners share to another.

Correct answer: A. Twenty seven thousand rupees

The direct answer is option A: ₹27,000 for B. First calculate A’s bonus. The bonus is 10% of the net profit of ₹90,000, so bonus = 10/100 × ₹90,000 = ₹9,000. This amount is taken out before the remaining profit is shared. Remaining profit = ₹90,000 − ₹9,000 = ₹81,000. A and B share this remainder in the ratio 2:1. Total ratio parts = 3, so B receives 1/3 of ₹81,000 = ₹27,000. Option A is correct. Option B, ₹30,000, would be B’s one-third share of the original ₹90,000 and wrongly ignores A’s bonus. Option C, ₹21,000, does not follow the stated ratio or the correct remainder. Option D, ₹9,000, is A’s bonus, not B’s share. The wording “first A gets bonus and then remaining profit is shared” fixes the order of calculation. Do not divide the full profit before deducting the bonus. Exam cue: calculate the special payment first, subtract it, then apply the ratio.

Correct answer: A. A is like a special partner receiving only interest

The deed may set special rights. If A receives only interest on capital then remaining profit goes to others as per deed.

Correct answer: A. Loss will not be debited to A

The direct answer is A: loss will not be debited to A. A special partnership agreement may give a person a share in profits while expressly protecting that person from losses. When the firm suffers a loss, A’s capital or current account is therefore not charged with any share of that loss. The loss is divided only among the partners who are responsible for bearing losses, according to their agreed ratio or the applicable rule. Option A is correct because it directly applies the exemption. Option B is wrong because A has specifically been exempted, so the whole loss cannot be debited to A. Option C is wrong because a loss is not a credit or gain to A; it is simply not charged to A. Option D is unrelated: exemption from loss does not automatically create a salary entitlement. The key exam cue is to separate “share in profits” from “liability for losses”; a special clause can treat them differently.

Correct answer: A. 60,000 rupees

The governing concept is the preparation of a Profit and Loss Appropriation Account, in which partner salary, commission and reserve are appropriations while interest on drawings is income for the firm. Start with net profit of Rs 100,000 and add interest on drawings of Rs 5,000, giving Rs 105,000 available for appropriation. Deduct A’s salary of Rs 20,000, B’s commission of Rs 10,000 and the reserve of Rs 15,000. The remaining profit is Rs 100,000 + Rs 5,000 − Rs 20,000 − Rs 10,000 − Rs 15,000 = Rs 60,000. Therefore option A is correct. The other amounts arise from omitting interest, treating it as a deduction, or leaving out one of the stated appropriations.

Correct answer: A. Additional credit in B account

The direct answer is Option A: additional credit in B’s account. A guarantee means B is assured a minimum share or amount. First calculate B’s actual entitlement; if the actual amount is lower, the deficiency is the shortfall that must be made good by A and C equally. Because the deficiency is receivable by B, B’s capital or current account receives an additional credit for that amount. Option A is correct. Option B is wrong because a debit would reduce B’s entitlement. Option C is wrong because the guarantee creates an adjustment. Option D is wrong because the deficiency is not B’s drawing; it is compensation for the guaranteed amount. A and C bear the deficiency equally in their profit accounts.

Correct answer: A. Both accounts are debited with their shares

The direct answer is option A: both A’s and C’s accounts are debited with their respective shares of the deficiency. Suppose B is guaranteed an amount but the profit credited to B is lower. The difference is called the deficiency. If A and C agree to bear that deficiency, the burden reduces the profit otherwise available to them. A reduction in a partner’s profit is recorded by debiting that partner’s account for the agreed amount. Thus A’s account is debited for A’s share and C’s account is debited for C’s share; B receives the deficiency through the appropriate adjustment. Option A is correct. Option B, crediting both A and C, would increase their profits instead of charging them for the deficiency. Option C, debiting only B, is wrong because B is the guaranteed partner receiving protection, while A and C are the partners bearing the shortfall. Option D, no entry, is wrong because an agreed deficiency transfer must be recorded. The exact amounts depend on the agreed burden ratio, but the debit effect on the partners bearing the deficiency is certain. Memory cue: “The partner who bears a shortfall is debited.”

Correct answer: A. Total final shares after all appropriations should match available profit

Matching total final shares with available profit is the best verification. It quickly catches errors in guarantee and ratio.

Correct answer: A. Rs 10,000

The governing concept is commission calculated after charging commission, after first allowing the stated salary. Profit after salary but before commission is Rs 134,000 − Rs 24,000 = Rs 110,000. Let commission be C. Since it is 10% of profit after charging commission, C = 10/100 × (110,000 − C). Thus 110C = 11,000,000, giving C = Rs 10,000. A check shows that Rs 110,000 − Rs 10,000 = Rs 100,000, and 10% of that is Rs 10,000. Therefore option A is correct; option C wrongly applies 10% before salary and commission.

Correct answer: A. Rs 16,000

The governing concept is that the order of appropriations specified in the partnership deed must be followed. The reserve is created first, so calculate 20% of the total profit of Rs 200,000: 20/100 × Rs 200,000 = Rs 40,000. The profit remaining for A’s commission is therefore Rs 200,000 − Rs 40,000 = Rs 160,000. A’s commission is 10% of this remaining profit, so commission = 10/100 × Rs 160,000 = Rs 16,000. Hence option A is correct. Option B applies the commission percentage to the original profit before creating the reserve. Option C uses neither the stated sequence nor a valid calculation, while option D results from subtracting an incorrect amount.

Correct answer: A. Overstated by Rs 24000

The governing concept is the effect of a reversal error in the Profit and Loss Appropriation Account. A partner’s commission should be debited because it is an appropriation that reduces the profit available for distribution. If Rs 12,000 is wrongly credited instead, the account is increased by Rs 12,000 rather than reduced by Rs 12,000. The difference between the wrong and correct treatment is therefore Rs 12,000 + Rs 12,000 = Rs 24,000. Remaining profit is consequently overstated by Rs 24,000, making option A correct. Option B ignores the reversal of the debit, while C and D state the wrong direction or deny the effect.

Correct answer: A. Sixty thousand rupees

Distributable profit is three lakh plus fifteen thousand minus fifty thousand minus twenty five thousand minus forty thousand which equals two lakh. C share is three tenths or sixty thousand rupees.

Correct answer: A. Twenty five thousand rupees

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

Correct answer: A. Rs 36,000

If commission is on profit before charging commission, then \(\text{B commission} = 18\%\text{ of }200000\). \(= 0.18 \times 200000 = 36000\). So B’s commission is \(\text{Rs }36000\).

Correct answer: A. Six thousand rupees

A actual share is forty thousand so deficiency is ten thousand. B and C should bear in five to three so C deduction is three eighths which is three thousand seven hundred fifty.

Correct answer: A. Three thousand seven hundred fifty rupees

A actual share is forty thousand and deficiency is ten thousand. B and C bear it in five to three so C share is three eighths or three thousand seven hundred fifty.

Correct answer: A. Forty thousand rupees

Total interest is ninety thousand but profit is seventy two thousand. In fifty to forty ratio A gets five ninths of seventy two thousand which is forty thousand.