Question

On dissolution of a partnership firm, profit or loss on realisation is distributed among the partners ______.

Options

• In capital ratio

• In Profit sharing ratio

• Equally

• None of the above

Answer 1

On dissolution of a partnership firm, profit or loss on realisation is distributed among the partners in profit sharing ratio.

Explanation:

On the dissolution of a partnership firm, the profit or loss on realisation is distributed among the partners according to their profit-sharing ratio. This is because the profit or loss from the sale of assets and settlement of liabilities directly affects the partners’ equity in the firm. The amount is then adjusted in their respective capital accounts based on the agreed-upon profit-sharing ratio.