Folake and Biodun are partners sharing profits and losses in the ratio . For the year ended 31 December 2025, the firm recorded a net profit of ₦680,000 before adjusting for interest of ₦20,000 on Folake's loan to the firm. Additional financial information for the year shows:
- Total interest on capital: ₦60,000 (Folake: ₦40,000; Biodun: ₦20,000)
- Annual salary allocated to Biodun: ₦100,000
- Total interest on drawings charged to partners: ₦20,000 (Folake: ₦10,000; Biodun: ₦10,000)
What is Biodun's share of the net divisible profit in Naira (₦)?
Answer: 130000 ₦
Answer
Biodun's share of the net divisible profit is ₦130,000.
Interest on a partner's loan is a charge against profit, reducing net profit from ₦680,000 to ₦660,000. In the Profit and Loss Appropriation Account, interest on drawings of ₦20,000 is added, bringing the total to ₦680,000. Deducting interest on capital (₦60,000) and partner salary (₦100,000) leaves a net divisible profit of ₦520,000. Biodun's share (1/4) equals ₦130,000.
Step-by-Step Solution
Key Concept
Profit and Loss Appropriation Account calculations in partnership accounts