Accountancy Part AAccounting for Partnership

Select the ratio in which A and B will share divisible profits.

Read the following information and answer the questions.

A and B entered into partnership to supply stationery items without any terms and conditions. A contributed ₹1,00,000 as capital while B contributed ₹20,000 only but he allowed his building to be used as the firm office. After running business for nine months, they felt an urgency of funds and the same was fulfilled by B by providing ₹80,000 as loan to the firm. At the end of the accounting year, they made a profit of ₹50,000. They decided to expand their business in future by admitting C into the firm and also to make agreement in writing containing all the terms and conditions.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → 1 : 1

The partners made no agreement about sharing profits. When the deed is silent, profits and losses are shared equally, whatever capital each partner has put in. So A and B share in the ratio 1 : 1, even though A’s capital is five times B’s.

NCERT (2026-27 edition):
Profit Sharing Ratio – “… If the partnership deed is silent about the profit sharing ratio, the profits and losses of the firm are to be shared equally by partners, irrespective of their capital contribution in the firm.”