The Partnership agreement between Maneesh and Girish provides that:
(A) Profits will be shared equally
(B) Maneesh will be allowed a salary of Rs 400 pm
(C) Girish who manages the sales department will be allowed a commission of 10% of the net profits after deducting Maneesh's salary
(D) 7% p.a. interest will be allowed on Partner's fixed capital
(E) 5% p.a. interest will be charged on partner's annual drawings
(F) The fixed capitals of Maneesh and Girish are Rs 1,00,000 and Rs. 80,000 respectively. Their annual drawings were Rs. 16,000 and Rs 14,000 respectively. The net profit for the year ended March 31, 2019 amounted to Rs. 40,000
Calculate the profit allocated to each partner after all adjustments.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs 10,290 to each partner
The appropriations are made from the net profit of Rs. 40,000 in the Profit and Loss Appropriation Account, and whatever remains is shared equally.
Maneesh’s salary = Rs. 400 × 12 = Rs. 4,800
Girish’s commission = 10% of (40,000 − 4,800) = 10% of 35,200 = Rs. 3,520
Interest on capital: Maneesh 7% of 1,00,000 = Rs. 7,000; Girish 7% of 80,000 = Rs. 5,600
Interest on drawings (added back): Maneesh 5% of 16,000 = Rs. 800; Girish 5% of 14,000 = Rs. 700
Divisible profit = 40,000 − 4,800 − 3,520 − 7,000 − 5,600 + 800 + 700 = Rs. 20,580
Share of each partner = 20,580 / 2 = Rs. 10,290
Interest on drawings is charged on the annual drawings for the full year here, because the deed charges 5% p.a. on annual drawings and gives no dates.
NCERT (2026-27 edition):
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