Partnership
Amit, Babu and Charu set up a partnership firm on April 1, 2022. They contributed ₹50,000, ₹40,000 and ₹30,000, respectively as their capitals and agreed to share profits and losses in the ratio of 2 : 2 : 1. Amit is to be paid a salary of ₹1,000 per month and Babu, a commission of ₹5,000. It is also provided that interest to be allowed on capital at 6% p.a. The drawings for the year were Amit ₹6,000, Babu ₹4,000 and Charu ₹2,000. Interest on drawings of ₹300 was charged on Amit's drawings, ₹200 on Babu's drawings and ₹100, on Charu's drawings. The net profit as per Profit and Loss Account for the year ending March 31, 2023 was ₹55,000 before charging manager's commission. Manager was allowed commission @ 10% on net profit after charging such commission.
From the above information answer.
Net divisible profit credited to Babu's Capital A/c is:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → ₹10,560
The divisible profit is what is left in the Profit and Loss Appropriation Account after every appropriation to partners is made, and it is then shared in the profit sharing ratio 2 : 2 : 1. The manager’s commission is a charge against profit, so the appropriation account starts from the profit left after it.
Manager’s commission:
Commission = ₹55,000 × 10/110 = ₹5,000
Net profit brought to the appropriation account = ₹55,000 − ₹5,000 = ₹50,000
Appropriations:
Amit’s salary = ₹1,000 × 12 = ₹12,000
Babu’s commission = ₹5,000
Interest on capital @ 6% = ₹3,000 + ₹2,400 + ₹1,800 = ₹7,200
Interest on drawings (an addition) = ₹300 + ₹200 + ₹100 = ₹600
Divisible profit:
= ₹50,000 + ₹600 − ₹12,000 − ₹5,000 − ₹7,200
= ₹26,400
Babu’s share:
= ₹26,400 × 2/5
= ₹10,560
Taking only 1/5 of the profit (₹5,280) uses Charu’s share, not Babu’s; the ratio is 2 : 2 : 1, so Babu gets two parts out of five.
NCERT (2026-27 edition):
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