Profit Distribution

Correct answer: A. No deficiency will be given

A guarantee ensures a partner receives at least the guaranteed amount. Here A's normal share is Rs 24,000 which is greater than the guarantee of Rs 20,000, so there is no deficiency and no additional payment or deduction is required. Option B would apply only if A's share were less than the guarantee (for example, if his share were Rs 16,000 then a Rs 4,000 top‑up would be needed). Options C and D are incorrect because no deduction or loss allocation is justified when the normal share already satisfies the guarantee. Exam tip: Always compare normal share with the guarantee; pay deficiency only when (guarantee − share) > 0.

Correct answer: A. Whether all appropriations are added or deducted

Residual profit is correct only when salary interest commission and reserve are correctly applied. Check appropriations before sharing profit.

Correct answer: A. Clear profit sharing ratio

Residual profit belongs to the partners in the profit-sharing ratio stated in the partnership deed. The amount of capital introduced by each partner does not automatically determine the distribution of profit. Therefore, even if the capital ratio is different, the clearly specified profit-sharing ratio must be applied to the residual profit, making option A correct. Capital ratio may be relevant only when the agreement expressly links a particular return or distribution to capital. Drawings are withdrawals and do not establish entitlement to profit. Salary is a separate appropriation payable only when authorised and is not a substitute for the residual profit ratio. The question expressly says that the profit ratio is clear, so there is no basis for using options B, C, or D.

Correct answer: A. First net profit then adjustments then share residual profit in ratio

The direct answer is Option A: first determine net profit, make all required adjustments, and then distribute the residual profit in the correct ratio. A safe solution starts by identifying whether each item is an expense, income, appropriation, drawing or correction. Adjust net profit for items that affect it; record appropriations separately; then calculate the amount left and share it according to the agreed profit-sharing ratio. Option A is correct. Option B ignores necessary items, so it can produce a wrong profit. Option C is wrong because drawings are withdrawals, not profit. Option D is wrong because profit is shared in the profit-sharing ratio, not automatically the capital ratio. Exam cue: classify every item before calculating the final division.

Correct answer: A. Rs 5000

When commission is on profit after charging commission the amount is 10 by 110 of Rs 55000. The answer is Rs 5000.

Correct answer: A. Equally

The governing rule is the statutory default applicable when the partnership agreement does not specify a profit-sharing ratio. In that situation, A, B and C share profits equally, even if their capital contributions are different. The amount of capital does not automatically determine the ratio in which residual profit is divided. Capital differences may matter for interest on capital if such interest is authorised, but that is a separate adjustment and does not replace the profit ratio. Drawings and working hours are also not default legal bases for sharing profit. Consequently, option A is correct. Only a valid agreement expressly providing another ratio could produce a different distribution.

Correct answer: A. Rs 20000

Total parts = 3 + 1 = 4. B's share is 1 part, so B = (1/4) × Rs 80,000 = Rs 20,000. The other options are incorrect: Rs 40,000 would be half the amount, Rs 60,000 equals 3/4 and Rs 80,000 is the whole profit — none match B's 1/4 share. Exam tip: always add the ratio parts first, then multiply the total profit by the fraction corresponding to the partner's share.

Correct answer: A. Credit side

Net profit starts on the credit side of appropriation account. Then salary interest and other appropriations are deducted.

Correct answer: A. It will be credited

Interest on drawings is charged to a partner because the partner used firm money for personal purposes during the accounting period. From the firm’s viewpoint, this charge is an income or a recovery from the partner. In the Profit and Loss Appropriation Account, income items are placed on the credit side, so interest on drawings is credited there.

The amount is ₹1,500, but the important point is its accounting treatment rather than the amount itself. It increases the profit available for appropriation among the partners. Therefore option A is correct. It is not ignored, added directly to capital, or debited in the appropriation account.

Correct answer: A. Up to Rs 18,000

The governing concept is the conditional allowance of interest on capital when available profit is insufficient. In the usual partnership-accounting treatment, interest on capital is an appropriation of profit, not a charge against profit. If the amount required is Rs 24,000 but only Rs 18,000 is available, the allowable amount is restricted to the available profit, Rs 18,000, in the absence of a special clause. Full Rs 24,000 cannot be appropriated from Rs 18,000 profit, while zero and Rs 6,000 have no basis. Therefore, option A is correct.

Correct answer: A. Salary will not be allowed

The governing concept is that a partner is not automatically entitled to remuneration for working in the partnership. Partner salary can be allowed only when the partnership deed or another valid agreement between the partners expressly authorises it. If the deed contains no salary provision, no salary is deducted or appropriated in the profit-distribution calculation. Therefore, option A is correct. There is no default rule requiring equal salary or salary in the capital ratio, so options B and C are incorrect. Salary is also not converted into drawings; drawings are withdrawals made by a partner, whereas salary is contractual remuneration. A later valid agreement may authorise salary, but it cannot be assumed from the stated facts.

Correct answer: A. Rs 7000

The direct answer is A: the commission is Rs 7000. The phrase “before charging commission” means the given Rs 70000 is the profit before commission is deducted, so it is the full base for calculation. Step 1: write the rate as 10%. Step 2: calculate 10% of Rs 70000: Rs 70000 × 10/100 = Rs 7000. Step 3: this is the commission. Option A is correct. Option B, about Rs 6364, uses the after-commission formula and is therefore unsuitable. Option C, Rs 7700, wrongly adds 10% to the commission base or applies an incorrect operation. Option D, Rs 3500, is 5% of the profit, not 10%. Memory cue: before commission means simple percentage on the stated profit.

Correct answer: A. Rs 10000

The direct answer is A: the commission is Rs 10000. Here commission is 10% of profit after charging commission. Let commission be C. The profit before commission is Rs 110000, so profit after commission is Rs 110000 − C. The equation is C = 10% × (110000 − C). Rearranging gives C = 0.10(110000 − C), so 1.10C = 11000 and C = 10000. The shortcut is profit before commission × rate/(100 + rate) = 110000 × 10/110 = Rs 10000. Option A is correct. Option B, Rs 11000, applies 10% to the amount before commission and belongs to the wrong type of question. Option C, Rs 12100, adds 10% to the profit incorrectly. Option D, Rs 9000, has no valid calculation basis. Memory cue: after commission means divide by 100 plus the rate.

Correct answer: A. Rs 18,000

General reserve = 15% of profit. Convert percent to decimal: 15% = 15/100 = 0.15. So ₹1,20,000 × 0.15 = ₹18,000. Option B (₹15,000) would correspond to 12.5%, option D (₹12,000) is 10%, and option C (₹1,02,000) is the remaining profit after creating the reserve (₹1,20,000 − ₹18,000), not the reserve itself. Exam tip: convert percent to a decimal and multiply to avoid calculation errors (e.g., 15% = 0.15).

Correct answer: A. Rs 6,000

The governing concept is deficiency under a minimum-profit guarantee. Deficiency is calculated as guaranteed minimum profit minus the partner’s normal share. Therefore, deficiency = Rs 40,000 − Rs 34,000 = Rs 6,000. Option A is correct. Rs 74,000 is the sum, Rs 40,000 is only the guaranteed amount, and zero would be possible only if the normal share equalled or exceeded the guarantee.

Correct answer: A. From profit distributable to other partners

Under a minimum-profit guarantee, the guaranteed partner must receive at least the promised amount. First, the partner’s actual share of profit is calculated according to the agreed profit-sharing ratio. If that share is lower than the guaranteed amount, the difference is called the deficiency. The deficiency is adjusted against the profit that would otherwise be distributed to the partners who have given the guarantee, normally in their agreed ratio unless the deed specifies another arrangement. It is not treated as B’s drawings, a bank borrowing, or a stock-account item. Therefore, option A is correct because the deficiency reduces the distributable profit of the other partners.

Correct answer: A. Rs 10000

The total parts of the ratio 2:2:1 are 2+2+1 = 5. C has 1 part, so C receives 1/5 of the total loss: 1/5 × Rs 50,000 = Rs 10,000. The closest distractor Rs 20,000 equals 2/5 of Rs 50,000, which would be A's or B's share, not C's. Exam tip: add the ratio parts first, then multiply the total amount by the specific partner's fraction (their part divided by total parts).

Correct answer: A. Interest on loan is expense and interest on capital is appropriation

Interest on partner loan is treated as expense before finding profit. Interest on capital is generally profit appropriation.

Correct answer: A. Expense in Profit and Loss Account

Interest on a partner’s loan is a charge against the profits of the firm, unless a specific accounting rule or agreement changes the treatment. It is paid for the use of money lent to the firm and is therefore an expense incurred in arriving at net profit. The firm records Rs 5,000 on the debit side of the Profit and Loss Account before the profit is transferred for appropriation among partners. The Profit and Loss Appropriation Account deals with the distribution of the profit already determined, such as partner salary, commission, interest on capital and the residual profit share. It is not a drawing or a reserve. Hence option A is correct.

Correct answer: A. Rs 8,000

Commission is calculated on the sales amount and does not depend on profit. Here commission = 2% of Rs 4,00,000 = \(400000\times\dfrac{2}{100}=8000\). Therefore the correct answer is Rs 8,000. Closest distractors arise from using 1% (Rs 4,000), 3% (Rs 12,000) or 5% (Rs 20,000) by mistake. Exam tip: convert the percentage to a decimal or use \(\frac{percentage}{100}\) to multiply quickly and avoid errors.

Correct answer: A. The order given in deed

A clear deed condition applies first in partnership. Order becomes very important when profit is insufficient.

Correct answer: A. Current Account

Under the fixed capital method, the balance of each partner’s capital account is intended to remain unchanged except for permanent additions or withdrawals of capital. Routine items affecting a partner’s entitlement, such as share of profit, salary, commission, interest on capital, drawings and interest on drawings, are recorded in that partner’s current account. Thus, when profit is appropriated, the partner’s share is credited to the current account rather than the fixed capital account. The Trading Account determines gross profit, and the Sales Account records sales; neither is a partner’s personal account. Therefore, option A is correct.

Correct answer: A. Capital account

Under fluctuating capital method all partner adjustments are recorded in capital account. So profit share is credited to capital account.

Correct answer: A. Profit and Loss Appropriation Account

When final profit is transferred to partners appropriation account is debited. Partners accounts are credited.

Correct answer: A. They are debited

A loss reduces partners' capital or current balances. To allocate the loss, partners' capital/current accounts are debited and the loss is credited to Profit & Loss (or Profit & Loss Suspense) account. Option B is incorrect because accounts are credited when profits are distributed, not when losses are allocated. Option C is wrong — partners' accounts are not closed for routine loss allocation (closing happens on dissolution). Option D is irrelevant — losses are not transferred to the bank. Exam tip: remember the rule — loss allocated to partners = debit their accounts; profit allocated = credit their accounts.