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
| Particulars | Amount (₹) | Particulars | Amount (₹) |
| To Partner's Current Accounts: | By Profit and Loss A/c (Net Profit) | 40,000 | |
| Interest on Capital | By Partner's Current Accounts: | ||
| Maneesh (1,00,000×7%) = 7000 | Interest on Drawings | ||
| Girish (80,000×7%) = 5600 | Maneesh (16,000×5%) | 800 | |
| Total Interest on Capital | 12600 | Girish (14,000×5%) | 700 |
| To Maneesh's Current A/c (Salary) | 4800 | Total Interest on Drawings | 1,500 |
| (400×12 months) | |||
| To Girish's Current A/c (Commission) | 3520 | ||
| Calculation: (40,000−4,800)×10% | |||
| To Partner's Current Accounts (Share of Profit) | 20580 | ||
| (Balancing Figure) | |||
| Maneesh (1/2) | 10290 | ||
| Girish (1/2) | 10290 | ||
| Total | 41500 | Total | 41,500 |
Note: The given answer is as per NTA.
In standard accounting treatment, when the timing of drawings is not mentioned, interest is usually calculated for 6 months. However, in this particular MCQ, if we apply the 6-month rule, the final share comes to Rs 9,915, which is not among the given options. Hence, it appears that the paper-setter has considered interest on drawings for the full year so that the result matches the available choices.