Calculate manager's commission at 10% on Net profit, if the Divisible profit of a firm is Rs. 10,000, salary to partners is Rs. 3000 and Interest on drawings is Rs. 2000.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Rs. 1100
The divisible profit is what is left for the partners after the appropriations. Working back adds the partners’ salary (an appropriation) and deducts the interest on drawings (an amount credited to the Profit and Loss Appropriation Account) to reach the net profit.
Net profit = Divisible profit + Salary to partners − Interest on drawings
Net profit = Rs. 10,000 + Rs. 3,000 − Rs. 2,000
Net profit = Rs. 11,000
Manager’s commission = 10% of Rs. 11,000 = Rs. 1,100
The manager is an employee, not a partner, so the commission is a charge against profit and not an appropriation of it.