Question : Assertion (A) Partner distribution of earnings and losses is based on their profit sharing ratio, not their capitalization ratio.
Reason (R): Profit is dispersed in proportion to appropriations if the amount of appropriations is greater than the amount of profit available for distribution.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Both Assertion (A) and Reason (R) are not correct.
Correct Answer: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A)
Solution : Yes, partners generally distribute profit in their profit sharing ratio. Assertion is true. Reason are also true, when appropriations are more than the available profit. Profit is distributed in the ratio of appropriation. But reason does not explain why profits are distributed in the profit sharing ratio.
Hence the correct answer is option 2.
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