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If the partnership deed does not provide a profit-sharing ratio, how will profit be distributed?

Answer and explanation

Correct answer: Equally

The governing concept is the statutory default rule for distributing partnership profits when the partnership deed is silent. If the deed does not specify a profit-sharing ratio, the partners share the profit equally, regardless of differences in their capital contributions, drawings, working time, or personal responsibilities. Therefore, option A is correct. The capital ratio cannot automatically replace the profit-sharing ratio, so option B is incorrect. Drawings represent withdrawals from the firm and do not determine a partner’s entitlement to profit, making option C unsuitable. Salary is a separate appropriation or remuneration item and is not a basis for dividing residual profit, so option D is also wrong. A valid contrary agreement would change this result.

Related tags

Silent DeedEqual ProfitDefault Partnership RuleProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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