Profit Distribution

Correct answer: B. Partner's account is debited

The governing concept is the dual effect of interest on drawings. Such interest is income for the firm, so it is credited to the Profit and Loss Appropriation Account. At the same time, the amount is recoverable from the partner because the partner has used firm funds for personal drawings. The partner’s account must therefore be debited, recording the amount payable by or chargeable to that partner. Hence option B is correct. Option A reverses the personal-account effect, option C ignores the second entry, and option D involves a loan account that is unrelated to ordinary drawings. The complete entry is: Partner’s Capital or Current Account Dr. to Profit and Loss Appropriation Account.

Correct answer: B. Profit will appear higher

The governing concept is that interest on capital is normally debited to the Profit and Loss Appropriation Account and credited to the partner’s capital or current account. The debit reduces the profit available for further distribution. If it is wrongly credited to the appropriation account instead, the account receives an additional credit rather than the required debit. This makes the available profit appear higher than it should. Compared with correct treatment, the total difference would be twice the interest amount, because a debit was replaced by a credit; however, the direction asked in the question is simply an increase in shown available profit. Therefore option B is correct. The error does not alter the capital ratio, and it is not a no-effect error.

Correct answer: A. Eighteen thousand rupees

The governing concept is that specifically provided salary and commission are appropriated first, and only the balance is divided in the agreed profit-sharing ratio. Start with net profit of Rs 72,000. Deduct A’s salary of Rs 12,000 and B’s commission of Rs 6,000: remaining profit = Rs 72,000 − Rs 12,000 − Rs 6,000 = Rs 54,000. A and B share this balance in the ratio 2:1, so B receives one part out of three parts. B’s share = Rs 54,000 × 1/3 = Rs 18,000. Therefore option A is correct. Option D is only the commission, option B is two-thirds of the balance, and option C does not follow the stated ratio.

Correct answer: A. Fourteen thousand rupees

The governing concept is that the stated reserve and partner salary are deducted or appropriated before the remaining profit is divided in the agreed ratio. Total appropriations are Rs 10,000 + Rs 20,000 = Rs 30,000. Remaining profit is therefore Rs 1,00,000 − Rs 30,000 = Rs 70,000. The ratio 5:3:2 has ten total parts, and C is entitled to two parts. C’s share is Rs 70,000 × 2/10 = Rs 14,000. Hence option A is correct. Option B corresponds to two parts of the original Rs 1,00,000, not the remaining profit; option C is only the reserve, and option D does not follow the two-tenths calculation. The salary and reserve are not themselves C’s share.

Correct answer: A. 7,500 rupees

The governing concept is appropriation of profit before applying the agreed profit-sharing ratio. The special bonus is paid first, so it is deducted from the available profit: Rs 24,000 − Rs 6,000 = Rs 18,000. The remaining amount is divided between A and B in the ratio 7:5, whose total is 12 parts. B's share is therefore 5/12 × Rs 18,000 = Rs 7,500. Hence option A is correct. Option B incorrectly treats the balance as if it were divided equally, option C ignores the ratio and option D merely repeats the bonus amount rather than calculating B's residual share.

Correct answer: A. Distributable profit will be overstated by Rs 18,000

The governing concept is the treatment of interest on capital in the Profit and Loss Appropriation Account. Interest on capital is an appropriation of profit and must be debited before the remaining profit is distributed among partners. If the required debit of Rs 18,000 is omitted, the accounting record does not reduce profit by that amount. Consequently, the profit available for distribution appears Rs 18,000 higher than it should be. Thus option A is correct. Option B reverses the direction of the error, option C ignores the omitted debit, and option D has no logical connection with the amount of the omission.

Correct answer: A. 20,000 rupees

The governing concept is a fixed prior appropriation followed by division of the residual profit. First, B receives the specified Rs 25,000. The profit left for ordinary sharing is Rs 65,000 − Rs 25,000 = Rs 40,000. Since the remaining profit is shared equally, A receives one-half of Rs 40,000, which is Rs 20,000. Therefore option A is correct. Option B is B's prior fixed amount, not A's share; option C divides the total profit equally without allowing B's prior amount; and option D assigns the entire residual amount to A instead of sharing it.

Correct answer: A. Thirty thousand rupees

The governing concept is distribution of divisible profit in the agreed ratio. The total ratio parts are 2 + 2 + 3 = 7. The value of one part is Rs 70,000 ÷ 7 = Rs 10,000. C has three parts, so C’s share is 3 × Rs 10,000 = Rs 30,000. Thus option A is correct; the other amounts correspond to incorrect parts or calculations.

Correct answer: A. 50,000 rupees

The governing concept is that a specific partnership agreement overrides the normal profit-and-loss-sharing ratio. Although A and B normally share in the ratio 2:3, B has expressly been exempted from loss. Therefore the entire loss of Rs 50,000 must be borne by A. A's loss share is consequently Rs 50,000, making option A correct. Option B would be the amount obtained by applying A's normal two-fifths ratio, and option C would apply B's normal three-fifths ratio; both ignore the exemption. Option D incorrectly assumes that exemption of B also removes A's liability.

Correct answer: A. Loss to be shared among partners

The governing concept is the distinction between an appropriation and the resulting allocation of loss. A partner’s salary is an appropriation made before the residual profit is distributed. If the available profit is smaller than the salary allowed under the deed, subtracting the salary produces a negative residual. That negative figure is not an extra salary, an interest item, or income from a bank; it represents a loss arising after the agreed appropriation. The loss must be transferred to the partners’ capital or current accounts and shared in the loss-sharing ratio specified by the partnership deed. If the deed gives no separate loss ratio, the usual profit-sharing ratio is applied. Therefore option A is correct, while options B, C and D describe unrelated treatments.

Correct answer: A. Generally it will not be allowed

Interest on a partner’s capital is normally an appropriation of profit, not a charge against profit. Under the usual partnership rule, it is allowed only out of available profits, unless the deed contains a special provision treating it differently. Since the firm has a loss and no special clause exists, the interest is generally not allowed. Therefore, option A is correct.

Correct answer: A. Rs 18,000

The governing concept is time-based apportionment of a partner's annual salary. An annual salary of Rs 24,000 is earned over twelve months, so the monthly salary is Rs 24,000 ÷ 12 = Rs 2,000. Since A remained a partner for nine months, the salary allowable in the profit distribution is Rs 2,000 × 9 = Rs 18,000. Equivalently, it is 9/12 × Rs 24,000 = Rs 18,000. The full Rs 24,000 would apply only for twelve months. Rs 12,000 represents six months, and Rs 9,000 incorrectly treats the number of months as a fraction of the annual amount without the proper monthly conversion. Thus option A is correct.

Correct answer: A. Rs 25,000

The governing concept is correction of an incorrect profit-sharing ratio. The total of both ratios is 6. Under the wrong ratio 3:2:1, B received 2/6 of Rs 1,50,000, or Rs 50,000. Under the correct ratio 2:3:1, B should receive 3/6 of Rs 1,50,000, or Rs 75,000. The adjustment due to B is therefore Rs 75,000 − Rs 50,000 = Rs 25,000. Option A is correct. Option B states the wrong share rather than the additional amount; option C states the correct total share, not the adjustment; option D ignores the difference between the two ratios.

Correct answer: A. Their distributable profit will reduce

The governing concept is a firm-level guarantee of a partner's minimum share. When the firm, rather than a particular partner, bears C's deficiency of Rs 20,000, the deficiency is charged against the firm's profit or the amount available for distribution. Consequently, the pool left for the other partners, A and B, is reduced by that amount, subject to the exact sharing arrangement in the agreement. Therefore option A expresses the general effect correctly. The deficiency does not automatically reduce drawings, because drawings are withdrawals and are separate from profit allocation. It also does not increase interest on capital, and option D is incorrect because the firm's distributable profit is affected.

Correct answer: A. Rs 30,000

The governing concept is rectification of a wrong profit-sharing ratio. Both ratios total seven. Under the incorrect ratio 4:2:1, B received 2/7 of Rs 2,10,000, which equals Rs 60,000. Under the correct ratio 3:3:1, B should receive 3/7 of Rs 2,10,000, which equals Rs 90,000. The additional amount required is therefore Rs 90,000 − Rs 60,000 = Rs 30,000. Option A is correct. Option B is only the amount already received under the wrong ratio, while option C is B’s correct total share, not the adjustment. Option D ignores the difference caused by the incorrect ratio.

Correct answer: A. Rs 30,000

The governing concept is distribution of the residual profit according to the agreed profit-sharing ratio. The ratio 3:2 contains 3 + 2 = 5 total parts, of which A is entitled to 3 parts. A’s share is therefore calculated as (3/5) × Rs 50,000. First, Rs 50,000 ÷ 5 = Rs 10,000 per ratio part; multiplying by A’s three parts gives Rs 30,000. B receives the remaining two parts, or Rs 20,000, and the two shares together equal the full Rs 50,000. Option B is B’s share, option C incorrectly divides the profit equally, and option D assigns the entire profit to A. Hence option A is the only answer consistent with the stated ratio.

Correct answer: A. Up to available profit

The governing concept is the treatment of interest on capital as an appropriation of profit under the usual partnership-accounting framework, subject to the partnership deed and applicable law. If the amount calculated as interest is greater than the profit available for appropriation, the normal adjustment cannot exceed that available profit. For example, if calculated interest is Rs 20,000 but only Rs 12,000 is available, the credit is generally restricted to Rs 12,000 under the stated assumption. It is not automatically the full calculated amount, always nil, or related to drawings. Therefore option A is the suitable general answer, while exact deed terms must always be checked.

Correct answer: A. It increases remaining profit

The governing concept is that interest on drawings is income for the firm, even though it is charged to the partner who made the drawings. A credit in the Profit and Loss Appropriation Account increases the amount available for distribution among partners. For example, if the profit available before this credit is Rs 50,000 and interest on drawings is Rs 2,000, the balance available before other appropriations becomes Rs 52,000. It therefore increases remaining profit or reduces a loss to be shared. Option B reverses the effect, option C ignores the credit, and option D treats it only as a memorandum adjustment. Hence option A is correct.

Correct answer: B. ₹20,000

The governing concept is a minimum-profit guarantee. First calculate B’s normal share under the agreed ratio: the total ratio is 4 + 1 = 5, so B’s share is ₹60,000 × 1/5 = ₹12,000. The guarantee promises B at least ₹20,000. The deficiency is therefore ₹20,000 − ₹12,000 = ₹8,000. Since the question states that A will bear this deficiency, ₹8,000 is transferred from A’s share to B’s share. Consequently, B receives the guaranteed amount of ₹20,000. Option A is only B’s ordinary share before applying the guarantee. Options C and D do not follow either the ratio or the stated guarantee.

Correct answer: A. ₹50,000

Salary and commission are first treated as appropriations of the firm’s profit, and only the residual profit is divided in the agreed ratio. The total of these appropriations is ₹36,000+₹24,000=₹60,000. Therefore, residual profit equals ₹1,40,000−₹60,000=₹80,000. The ratio 5:3 has eight total parts, of which A receives five. A’s share in the remaining profit is 5/8×₹80,000=₹50,000. Thus option A is correct. The figure ₹87,500 results from applying the ratio to the original profit rather than the residual amount. ₹62,500 and ₹45,000 likewise do not follow the correct residual base and ratio. A’s salary is separate from this calculated residual share.

Correct answer: B. Debited to partners’ Capital Accounts

The governing concept is that a debit balance in the Profit and Loss Account represents an accumulated loss. On dissolution, this loss is transferred to the partners’ Capital Accounts in their agreed profit-sharing ratio. Each partner’s Capital Account is debited because the loss reduces the amount ultimately payable to that partner. Option A reverses the treatment and would be appropriate for distributing a profit, not a debit balance. Creditors’ Accounts are not used to distribute partners’ accumulated loss, and the Cash Account records cash movements rather than allocating the loss. Therefore, the debit balance is debited to the partners’ Capital Accounts, making option B correct.