Assertion (A): P, Q and R are partners with capitals of ₹ 3,00,000; ₹ 4,00,000 and ₹ 5,00,000 respectively. As per partnership deed, interest on capital is to be allowed @ 5% p.a., and A is also allowed a quarterly salary of ₹ 40,000. Net profit for the year amounted to ₹ 2,50,000. The balance of profit will be distributed among them equally. Reason (R): Distributable profit for the year is sufficient to allow all appropriations. Hence, the balance of profit will be distributed among them equally. In the context of the above two statements, which of the following is correct?

Question

KollegeApply · Accepted Answer

Both (A) and (R) are correct, and (R) is the correct reason of (A). Explanation: Interest on Capital: P = 3,00,000 xx $\frac{5}{100}$ = ₹ 15,000 Q = 4,00,000 xx $\frac{5}{100}$ = ₹ 20,000 R = 5,00,000 xx $\frac{5}{100}$ = ₹ 25,000 Total Interest on Capital = 15,000 + 20,000 + 25,000 = ₹ 60,000 A’s Salary = 40,000 $\times$ 4 = ₹ 1,60,000 Total Appropriations = 60,000 + 1,60,000 = ₹ 2,20,000 Net Profit available = ₹ 2,50,000 Profit is sufficient to cover all appropriations ₹ 2,20,000, they will be allowed in full. Balance Profit = ₹ 2,50,000 – ₹ 2,20,000 = ₹ 30,000 This balance will be distributed equally (since the deed specifies equal distribution of the remaining profit).

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