Question

On disSolutions of a partnership firm, profit or loss on realization is distributed among the partners:

• A. In capital ratio
• B. In profit sharing ratio
• C. Equally
• D. None of these

Hint:

During disSolutions, always distribute realization profits or losses in the profit sharing ratio unless specified otherwise in the partnership agreement.

Answer 1

The Correct Option is B

Step 1: Understanding the distribution of profit or loss on realization.
On disSolutions, any profit or loss arising from the realization of assets is distributed among the partners in their agreed profit sharing ratio. This ensures that all partners bear the results of disSolutions equitably as per their contributions and entitlements.

Step 2: Identifying the correct ratio.
The profit sharing ratio is used because it reflects the partners' original agreement regarding the distribution of profits and losses during the partnership.