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The deed states that first a 25% reserve must be created and then B is given 10% commission on the remaining profit. Total profit = Rs 280,000. What is B's commission?

Answer and explanation

Correct answer: 21000

Reserve is created first: 25% of 280,000 = Rs 70,000. Remaining profit = 280,000 − 70,000 = Rs 210,000. B's commission = 10% of remaining = 10% × 210,000 = Rs 21,000. A common wrong choice is 28,000, which results from applying 10% to the total profit instead of the remaining profit. Exam tip: always follow the deed order — subtract reserves first, then compute commission on the balance.

Related tags

AccountancyPartnershipProfit-DistributionReserveCommissionNumericalProfit DistributionPartnership Accounts Basic Concepts

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