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.

  • A)

    Rs 30,000

  • B)

    Rs 50,000

  • C)

    Rs 1,00,000

  • D)

    Rs 1,20,000

32.54% got it right!Answer:BSolution:

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

As Salary


Bs Salary




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

Hey Prakash, the solution of this question is absolutely correct. There is no error in it. 
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.

I hope this answers your query. 
However, if you still find any difficulty then specify the point related to your doubt with all its relevant details so that we can help you in the best possible way. 
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