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Does inequality of capital automatically change the profit-sharing ratio in profit distribution?

Answer and explanation

Correct answer: No

The governing concept is that profit-sharing rights arise from the partnership agreement, not automatically from the amount of capital introduced. Partners may contribute unequal capital while agreeing to share profits equally or in any other specified ratio. Therefore, inequality of capital by itself does not change the profit-sharing ratio, so option A is correct. A different ratio can apply only when the deed or a subsequent valid agreement states it. Option B incorrectly links capital and profit mechanically, while options C and D introduce conditions that have no authority under the normal partnership rules.

Related tags

Unequal CapitalProfit-Sharing RatioPartnership AgreementProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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