Which profit is first used as base in profit distribution?

Correct answer: Net profit

Profit distribution in partnership accounts is made from the profit that remains after the normal business expenses and losses have been considered. This amount is called net profit. Gross profit is only the excess of sales over the direct cost of goods sold, so it is not yet the final amount available for appropriation. Cash profit and estimated profit are not the standard starting bases for appropriation.

The usual sequence is to determine net profit in the profit and loss account and then transfer it to the profit and loss appropriation account. Items such as partner salary, commission, interest on capital, and profit shares are adjusted there according to the deed. Therefore, the correct choice is net profit. Gross profit would be an earlier figure and could lead to distribution before other business expenses are deducted.