Multiple choice

X, Y and Z are partners in a firm. At the time of division of profit for the year, there was a dispute between the partners. Profits before interest on partner's capital were Rs.12,000 and Z demanded a minimum profit of Rs. 10,000 as his financial position was not good. However, there was no written agreement on this profit. Calculate the amount payable to X, Y and Z.

  1. Other partners will pay Z the minimum profit and will suffer loss equally.

  2. Other partners will pay Z the minimum profit and will suffer loss in capital ratio.

  3. X, Y will take Rs. 1,000 each and Z will take Rs. 10,000.

  4. Rs. 4,000 to each of the partners.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In the absence of a written agreement, profits are shared equally among partners regardless of capital or individual demands. 12000 / 3 = 4000 each.

AI explanation

Under the Indian Partnership Act, partners share profits equally in the absence of a formal written agreement specifying a different ratio. Because the total profit available before interest is Rs. 12,000 and Z lacks a legally enforceable claim to a Rs. 10,000 minimum share, the money must be distributed evenly among X, Y, and Z. Dividing Rs. 12,000 by 3 gives each partner Rs. 4,000. The amount payable to each partner is Rs. 4,000.

Keep practicing — related questions