Bisi and Halima are partners in a firm. For the year ended 31 December 2025, the firm recorded a net profit of ₦300,000. According to their partnership agreement, the following provisions apply:
- Annual salary to Bisi: ₦50,000
- Total interest on partners' capital: ₦30,000
- Total interest on drawings charged to partners: ₦10,000
What is the net divisible profit available for distribution between the partners?
Answer: 230000 ₦
Answer
The net divisible profit available for distribution is ₦230,000.
The net divisible profit is obtained by taking the net profit of ₦300,000, adding interest on drawings of ₦10,000 to get total appropriable profit of ₦310,000, and then deducting partner salary (₦50,000) and interest on capital (₦30,000) for a final net divisible profit of ₦230,000.
Step-by-Step Solution
Key Concept
Profit and Loss Appropriation Account