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A receives a commission of 10% on profit after deducting salary and before creating reserves. Total profit is Rs 250,000 and salary is Rs 50,000. What is A's commission?

Answer and explanation

Correct answer: Rs 20,000

First deduct salary: profit after salary = Rs 2,50,000 − Rs 50,000 = Rs 2,00,000. Commission is 10% on this amount (before reserves), so commission = 10% of Rs 2,00,000 = Rs 20,000. The closest distractor Rs 25,000 is incorrect because it represents 10% of the total profit before deducting salary. Exam tip: always follow the specified order (salary, commission, reserve, etc.) when computing commission on profit.

Related tags

CommissionSalaryReserve OrderPartnership AccountsProfit DistributionPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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