If a partnership agreement does not specify the profit-sharing ratio, how are profits normally divided among the partners?
Correct answer: C. Equally among all partners
- A. According to their capital contributions
- B. According to their salary allowances
- C. Equally among all partners
- D. According to their drawings
Explanation
In the absence of an agreement, the usual legal rule is that partners share profits equally. Capital invested, salary, or drawings do not determine the ratio unless the agreement provides for them.
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About Partnership Accounts
Partnership accounts cover the partnership agreement, capital and current accounts, profit and loss appropriation, salaries, interest on capital, interest on drawings and profit-sharing ratios. They also address changes in partnership, including admission, retirement, goodwill, revaluation, dissolution and the settlement of partners’ balances.
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More Partnership Accounts questions
A new partner pays goodwill directly and privately to an existing partner, without depositing it in the partnership firm. What entry is made in the firm's books for this payment?
At dissolution, an unrecorded asset is sold for cash. Which entry correctly records the transaction?
On the retirement of a partner, how is the retiring partner's share of goodwill normally adjusted when goodwill is not raised in the books?
A firm's average profit is Rs. 80,000 and its normal profit is Rs. 60,000. If goodwill is valued at three years' purchase of super profit, what is its value?
On the admission of a partner, an existing General Reserve of Rs. 90,000 is transferred to the old partners. A and B share profits in the ratio of 2:1. What amount is credited to B?
A partner's fluctuating capital account has an opening balance of Rs. 100,000. During the year, he brings in Rs. 20,000, withdraws Rs. 15,000, receives Rs. 30,000 as profit share, and is credited with Rs. 5,000 interest on capital. What is the closing balance?