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A and B share profits in the ratio 2:3. Total loss is Rs 50,000, but B is exempted from the loss. What is A's share of the loss?

Answer and explanation

Correct answer: 50,000 rupees

The governing concept is that a specific partnership agreement overrides the normal profit-and-loss-sharing ratio. Although A and B normally share in the ratio 2:3, B has expressly been exempted from loss. Therefore the entire loss of Rs 50,000 must be borne by A. A's loss share is consequently Rs 50,000, making option A correct. Option B would be the amount obtained by applying A's normal two-fifths ratio, and option C would apply B's normal three-fifths ratio; both ignore the exemption. Option D incorrectly assumes that exemption of B also removes A's liability.

Related tags

Loss ExemptionPartnership AgreementLoss DistributionProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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