Use the following information to answer the next question.On January 01, 2010, A and B formed a partnership firm and contributed Rs 50,000 each as capital. On December 31, 2010, after all the adjustments, the capital accounts of A and B showed balances of Rs 58,000 and Rs 62,000 respectively. As per the partnership agreement, A and B are entitled to salary of Rs 12,000 and Rs 18,000 respectively. The profit is distributed among them in 2:3. During the accounting period, no additional capital was introduced and no drawings were made.
Ascertain the amount of profit of the firm during 2010.
As Capital on December 31, 2010
Bs Capital on December 31, 2010
Combined capital of the firm on December 31, 2010 after their salary
Add: Total Salary Paid
Less: Opening Capital
As Capital (Opening) on Jan. 01, 2010
Bs Capital (Opening) on Jan. 01, 2010
Profit earned during the year 2010
The correct answer is B ,i think answer B is incorrect because any amount withdraw in form of salary also is considered as drawings
However, in this question, the statement "As per the partnership agreement, A and B are entitled to salary of Rs 12,000 and Rs 18,000 respectively" implies that Salary has not been adjusted or added to the Opening Capital to ascertain the Closing Capital. This clearly means that the Closing Capital (after all adjustment) does not include the amount of salary paid. Thus, it should be added to Closing Capital to ascertain the amount of Profit during the year.
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