Ada and Bello formed a partnership business without drawing up a partnership deed. For the year ended 31st December 2025, the firm earned a profit of ₦180,000 before accounting for any interest or partner allowances. Ada contributed ₦500,000 as capital, while Bello contributed ₦300,000. Additionally, Bello advanced a loan of ₦200,000 to the firm on 1st January 2025. Bello demanded a monthly salary of ₦5,000 and 6% interest per annum on his capital. In accordance with the provisions of the Partnership Act 1890, what is Ada's share of the net profit (in ₦)?
Answer: 85000 ₦
Answer
Ada's share of the net profit is ₦85,000.
Because no partnership deed was drawn up, the provisions of the Partnership Act 1890 govern the business. Under this Act, partners are not entitled to salaries or interest on capital, and profits are shared equally. However, partners are entitled to 5% interest per annum on any loan advanced to the firm. Bello's loan interest equals ₦10,000 (5% of ₦200,000), which reduces net profit from ₦180,000 to ₦170,000. Sharing ₦170,000 equally results in ₦85,000 for Ada.
Step-by-Step Solution
Key Concept
Statutory rules under the Partnership Act 1890 in the absence of a Partnership Deed
Estimated Time:1m 30s