Question

In a partnership business if there is no specific agreement among partners, profit is distributed in the ___________.

• A. Ratio of capital contributions
• B. Ratio of time spent in the business
• C. Ratio of be decided by the court
• D. Equal ratio

Answer 1

Answer: (D)

Equal ratio

A partnership is a form of business where two or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates. That income is paid to partners, who then claim it on their personal tax returns – the business is not taxed separately, as corporations are, on its profits or losses.

The ratio in which partners decide to share profit and loss is known as profit sharing ratio.

In case, if partners does not not have agreement or partnership deed then profit sharing ratio of all partners will be equal.