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If the deed has no provision for partner salary, what will happen to salary in profit distribution?

Answer and explanation

Correct answer: Salary will not be allowed

The governing concept is that a partner is not automatically entitled to remuneration for working in the partnership. Partner salary can be allowed only when the partnership deed or another valid agreement between the partners expressly authorises it. If the deed contains no salary provision, no salary is deducted or appropriated in the profit-distribution calculation. Therefore, option A is correct. There is no default rule requiring equal salary or salary in the capital ratio, so options B and C are incorrect. Salary is also not converted into drawings; drawings are withdrawals made by a partner, whereas salary is contractual remuneration. A later valid agreement may authorise salary, but it cannot be assumed from the stated facts.

Related tags

Partner SalaryPartnership DeedProfit DistributionRemunerationPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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