Accounting Online Program Certification Practice Test

How should Gina, Hardeep, and Iona divide the profit for the year ended 31 December 20X3?

1. Gina £200,000, Hardeep £116,000, Iona £84,000

2. Gina £120,000, Hardeep £140,000, Iona £140,000

3. Gina £100,000, Hardeep £200,000, Iona £100,000

4. Gina £150,000, Hardeep £150,000, Iona £100,000

The correct answer is: Gina £200,000, Hardeep £116,000, Iona £84,000

In determining how Gina, Hardeep, and Iona should divide the profit for the year ended 31 December 20X3, it is essential to refer to the partnership agreement and the profit-sharing structure if it is specified. The distribution of profits is usually based on the partnership's agreement, which may stipulate a fixed ratio, a performance-related basis, or an equal sharing plan. In this scenario, selecting the first option indicates that the profits have been allocated according to a specified arrangement, reflecting the partners' contributions, roles, or agreed-upon percentages within the partnership. The division shows that Gina receives a substantial portion due to her potentially leading role or higher contribution, while Hardeep and Iona receive different amounts that could be reflective of their status or involvement in the partnership. Among the other choices, such as equal sharing or more equitable partitions, the first option aligns with potential reasons such as separate agreements on varying roles, previous contributions by each partner, or compensation for differing workloads and responsibilities. Understanding the rationale behind the correct answer involves recognizing that when dividing profits, it is crucial to examine the terms laid out in the partnership agreement. If specific contributions or roles define the profit-sharing percentages, then following those established guidelines leads to the most