In partnership accounts, a partner's salary is generally treated as which type of item?
Correct answer: B. An appropriation of net profit
- A. A charge against gross profit
- B. An appropriation of net profit
- C. A liability to outside creditors
- D. A deduction from fixed capital
Explanation
A partner acts as an owner rather than an employee, so the partner's salary is normally an appropriation of profit. It is recorded after determining net profit, according to the partnership agreement. A salary paid to an outside employee would instead be a business expense.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
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.
Practise Partnership Accounts
34 free Partnership Accounts MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Partnership Accounts questions
A partnership deed is silent about interest on partners' capital. Under the usual legal rule, which treatment applies?
A, B and C share profits in the ratio of 3:2:1. B retires, and A and C agree to share future profits in the ratio of 2:1. What is the gaining ratio of A and C?
At dissolution, an asset with a book value of Rs. 100,000 is sold for Rs. 80,000. A liability of Rs. 30,000 is settled for Rs. 28,000, with no other realization items. What is the result on the Realisation Account?
A firm's average annual profit is Rs. 50,000. If goodwill is valued at three years' purchase of average profit, what is the value of goodwill?
A and B share profits in the ratio of 3:2. C is entitled to one-fifth of the profit, with a guaranteed minimum of Rs. 30,000. If the firm's profit is Rs. 100,000, and A gives the guarantee, how much does A bear as deficiency?
A and B share profits in the ratio of 3:2. A's interest on capital of Rs. 10,000 and B's interest on capital of Rs. 6,000 were omitted, although Rs. 50,000 profit had already been distributed in the profit-sharing ratio. What past adjustment is required?