PRC-1 · Chapter 10 · Question 54 of 100
Partner A and Partner B have an equal profit-sharing agreement. Partner B is entitled to a monthly salary, but Partner A is not. If the business earns a net profit for the year, which statement is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Partner B will have a higher total amount credited to their capital account.
Explanation
Partner B will receive their salary allocation first. The remaining residual profit is then split equally. Thus, Partner B's total credit (Salary + 50% Residual Profit) will be higher than Partner A's (50% Residual Profit only).
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