CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization
Ravi, Sunil and Meena run a partnership firm without any written partnership deed. Ravi contributed ₹5,00,000 as capital, Sunil ₹3,00,000 and Meena ₹2,00,000. The firm earned a profit of ₹1,20,000 for the year. Under the Indian Partnership Act, 1932, in the absence of agreement, what is Sunil's share of profit?
Sunil's share is ₹40,000. With no partnership deed, the Indian Partnership Act provides that partners share profits equally irrespective of capital contributed, so the ₹1,20,000 profit is divided among three partners equally.
- A₹36,000
- B₹60,000
- C₹40,000Correct
- D₹24,000
Explanation
Absent an agreement, partners share profits equally regardless of capital. ₹1,20,000 divided by 3 equals ₹40,000 each. The figure of ₹36,000 wrongly shares profit in the capital ratio 5:3:2 (3/10 of 1,20,000).
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