Profit Distribution

General appropriation is not made beyond available profit. If no order is given proportionate restriction is safe.

Wrong profit distribution can be corrected through adjustment entry. In exams find the difference between correct and wrong shares.

Profit is distributed according to the profit‑sharing ratio specified in the partnership deed. Here the partners have agreed to share profits equally, so the net profit is shared equally. The capital ratio is applied only if the deed specifies profit sharing in proportion to capitals; it is not a default. Drawings or salaries are separate appropriations (salaries may be paid before distribution), but the remaining profit is still distributed according to the agreed profit ratio. Exam tip: Always check the partnership deed first — the stated profit-sharing ratio governs distribution; if none is given, profits are shared equally by default.

Distributable profit is found by deducting debit appropriation items from credits. Rs 120000 minus Rs 45000 equals Rs 75000.

Add interest on drawings to net profit and deduct interest on capital and salary. Rs 95000 plus Rs 5000 minus Rs 35000 equals Rs 65000.

Total profit is Rs 60,000 and A and B share equally, so B's normal share = 60,000 ÷ 2 = Rs 30,000. Since the guaranteed amount is Rs 35,000, deficiency = 35,000 − 30,000 = Rs 5,000. Why others are wrong: option B is B's normal share, option C is the guarantee itself, and option D would be correct only if the normal share were at least the guarantee. Exam tip: always compute the normal share from profit ratios first; deficiency = max(0, guarantee − normal share).

The condition states A and B will bear C's deficiency equally, so each pays half the deficiency. Therefore A's share = 6000 ÷ 2 = Rs 3000. Why other options are wrong: Rs 2000 would be if the deficiency were split equally among all three partners (6000 ÷ 3), Rs 1500 corresponds to C's share if the total loss were divided in the profit ratio 3:3:2 (2/8 × 6000 = 1500), and Rs 6000 assumes A bears the entire shortfall. Exam tip: Always note whether sharing is ‘equally’ between specified partners or 'in profit‑sharing ratio' before calculating.

Cs normal share is three tenths which is Rs 24000. Guarantee is Rs 30000 so deficiency is Rs 6000.

Interest on capital is an appropriation out of profit. In loss and under such condition it will not be allowed.

The direct answer is Option A: interest on drawings will still be charged, if the deed provides for it. Drawings are amounts taken out by a partner. Interest on drawings is charged to compensate the firm for the use of its money and is credited to the firm’s Profit and Loss Appropriation Account, with a corresponding debit to the partner. A business loss does not cancel a contractual provision. Option A is correct. Option B would be correct only if the deed did not provide for interest, or if another applicable agreement removed it. Option C has no general basis; the amount is not automatically halved. Option D is wrong because interest on drawings is not distributed in the profit-sharing ratio. Exam cue: read the deed first; contractual interest on drawings is charged even when there is a loss.

Salary is debited to appropriation account. Its second effect is credit to partners capital or current account.

Interest on capital is payable to the partner and therefore is credited to the partner's capital/current account. In partnership accounting the double effect is: (1) debit the Profit & Loss Appropriation (or interest expense in appropriation) account and (2) credit the partner's account. Option B is wrong because the partner's account is not debited when interest is payable. Option C refers to a cash payment (debit cash) which only applies when interest is actually paid, not the standard second effect in the partner's ledger. Exam tip: remember "interest payable to partner = credit partner's account."

Interest on drawings is income of the firm and is charged to the partner. Under double-entry the usual journal is: Partner’s Current A/c Dr; To Interest on Drawings A/c. Thus the partner’s account is debited as the second effect. Option B (credit) is the reverse and therefore incorrect. Option C (bank debit) only applies if interest is actually paid into bank immediately; normally bank is not affected until payment. Option D is wrong because interest on drawings is not added to interest on capital. Exam tip: think in terms of who owes whom — drawing interest increases the partner’s liability in the books, so debit the partner’s account.

Total parts = 3+2+1 = 6. B has 2 parts, so B's share = (2/6) × Rs 72,000 = Rs 24,000. Option B (Rs 36,000) is the common mistake of using 3/6 which actually equals A's share. Exam tip: always add the ratio parts first, then multiply the partner's part fraction by the total profit.

Final profit is given to partners in their ratio. It is credited to capital or current accounts.

A net loss in the appropriation account reduces the partners' claims (their capital/current accounts). Therefore the loss is debited to the partners' accounts, usually in their profit-sharing ratio. Why not the closest distractor: credit would increase capital, but a loss decreases it, so credit is incorrect. Exam tip: remember the rule — "profit is credited; loss is debited" and always allocate in the agreed profit-sharing ratio unless otherwise stated.

After salary remaining profit is Rs 48000 and one fourth is Rs 12000. Total share will be Rs 24000.

After commission remaining profit is Rs 90000. A gets half Rs 45000 plus commission Rs 10000 totaling Rs 55000.

Interest on drawings is a credit item in the Profit and Loss Appropriation Account because it is income for the firm. A credit increases the amount of profit available for distribution. If this credit is accidentally omitted, the calculation does not include an amount that should have increased the distributable profit.

Consequently, the profit shown as available for distribution will be lower than the correct amount by the omitted interest on drawings. For example, if ₹2,000 should have been credited but was omitted, the distributable profit would appear ₹2,000 too low. Therefore option A is correct. The omission does not make the profit zero and does not increase the shown amount.

Interest on capital is an appropriation of profit, not an ordinary operating expense. In the Profit and Loss Appropriation Account, it is placed on the debit side because it is an amount assigned to partners before the remaining profit is divided. The remaining profit is found after subtracting such appropriations.

If the interest is accidentally omitted, the subtraction does not take place. Consequently, the balance left for distribution appears higher than it should be by exactly the amount of interest omitted. For example, if profit is ₹50,000 and interest is ₹5,000, the correct balance is ₹45,000, but omission shows ₹50,000. Hence option A is correct; it does not automatically create a loss or have no effect.

A credit to a partner’s account generally increases the amount payable to or claimable by that partner. When a firm earns profit, the profit belongs to the partners according to the agreed sharing arrangement. The partners’ capital or current accounts are therefore credited with their respective shares of profit.

For example, if total profit is ₹30,000 and two partners share it equally, each partner’s account is credited with ₹15,000. This increases their claims against the firm. A loss would normally have the opposite effect and would be debited to their accounts. Drawings are also debited because they reduce the partners’ claims. Therefore, option A, profit is being distributed, is the correct choice.

Loss is distributed by debiting partners and crediting appropriation account. This closes the appropriation account.

First place appropriation items on correct sides and then share remaining profit in correct ratio. This is the key exam check.

Deficiency under guarantee is found from the difference between normal share and minimum amount. So normal share must be calculated first.

Total ratio = 5 + 3 = 8 parts. A's share = \(\frac{5}{8}\) of Rs 96,000 = \(\frac{5}{8} \times 96{,}000 = 60{,}000\). Option (C) 48,000 is incorrect because it represents half of 96,000 (\(\frac{1}{2}\)), not five-eighths. Exam tip: always add the ratio parts first and then multiply the distributable profit by the required fraction.