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A is to receive five percent commission on profit after charging such commission. Profit before commission is Rs 210000. What is the commission?

Answer and explanation

Correct answer: Rs 10,000

The governing concept is commission calculated on profit after charging the commission itself. Therefore the commission is not found by simply taking 5% of Rs 210,000, because that would calculate commission on profit before commission. Use the formula: commission = profit before commission × rate ÷ (100 + rate). Thus, commission = 210,000 × 5 ÷ 105 = Rs 10,000. The profit remaining after commission is Rs 200,000, and 5% of Rs 200,000 is also Rs 10,000. Hence option A is correct. Option B is the ordinary 5% calculation on the unadjusted profit, while C and D do not satisfy the stated after-charging condition.

Related tags

Commission After ChargingProfit DistributionPartnership AccountsPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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