Question

X and Y are partners in a firm. X is entitled to a salary of ₹ 10,000 per month and commission of 10% of the net profit after partners salaries but before charging commission. Y is entitled to a salary of ₹ 25,000 p.a. and commission of 10% of the net profit after chaging all commission and partners salaries. Net profit before providing for partners salaries and commission for the year ended 31st March, 2018 was ₹ 4,20,000, show distribution of profit.

Answer 1

Distribution of profit is given below:

Explanation:

X’s salary

$= 10,000 \times 12= Rs. 1,20,000$

Y’s salary = Rs. 25,000

Total = Rs. 1,45,000

Net profit given is Rs. 4,20,000

Calculation of Commission:

X’s commission will be 10% of Profit after salaries

(4,20,000 – 1,45,000 = Rs. 2,75,000)

$2,75,000 \times \frac {10}{100} = Rs. 27,500$

Y’s commission will be (10/100+rate) of profit after salaries

(4,20,000 – 1,45,000 = Rs. 2,75,000- 27,500= Rs. 2,47,500)  

$2,47,500 \times \frac {10}{110} = Rs. 22,500$

Total commission is 50,000 (27,500 + 22,500)

Profit Distribution:

Profit distribution will be equally divided as:

4,20,000 – 1,45,000 - 50,000 = Rs. 2,25,000

$2,25,000 \times \frac {1}{2} = Rs. 1,12,500$