Assertion (A): Partner’s drawings are always shown in the Profit and Loss Appropriation Account.

Reason (R): Drawings represent appropriation of profit.

A firm’s net profit before appropriation is ₹1,00,000. There are three partners A, B, and C. Interest on capitals and salaries total ₹1,20,000. How will the shortfall of ₹20,000 be treated?

Interest on partners’ loan is transferred to:

Assertion (A): Interest on capital is calculated on the amount of capital employed during the year.

Reason (R): Any additional capital introduced during the year qualifies for interest from the date of introduction.

Assertion (A): A partner’s loan carries a fixed rate of interest by law in the absence of an agreement.

Reason (R): Section 13(c) of the Indian Partnership Act, 1932 prescribes a 6% annual interest rate.

Assertion (A): Interest on partner’s capital is charged against profit.

Reason (R): It must be paid even when the firm incurs a loss.

The key distinction between charge and appropriation of profit lies in:

Assertion (A): Profit and Loss Appropriation Account records only those items that are related to the distribution of profit.

Reason (R): Interest on partner’s loan is recorded in the Profit and Loss Appropriation Account.

A firm earned a net profit of ₹80,000 after charging interest on a partner’s loan of ₹10,000. Partners decided to allow interest on capital at 10% on capital amounting to ₹50,000 each. The amount of profit available for distribution is:

If a partnership firm fails to make adequate profit, which of the following will not be affected?