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In which situation can allowing partner salary increase firm loss?

Answer and explanation

Correct answer: When deed says salary is payable irrespective of profit or loss

Normally, a partner’s salary is allowed only when the partnership deed provides for it. A special clause may state that the salary must be paid even when the firm has no profit or has suffered a loss. In that situation, the amount has to be borne despite the unfavourable result and can make the firm’s reported loss larger.

Option A expresses this condition: the deed makes salary payable irrespective of profit or loss. If the firm already has a loss and an additional amount is charged under the stated agreement, the loss increases by that amount. A silent deed does not automatically create this right, and interest on drawings is a separate adjustment. Therefore, option A is the intended correct choice.

Related tags

Salary As ChargeLossHard Concept

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