A invests ₹20,000, while B invests ₹30,000. A receives an additional 20% for management. The total profit is ₹60,000. What is A's share?
- (a)₹51,200
- (b)₹41,200
- (c)₹31,200
- (d)₹21,200
Answer
Why
Correct — C. Take A's management pay out of the profit first, then split the rest in the capital ratio.
Management pay: 20% of 60,000 = 12,000
Remaining profit: 60,000 − 12,000 = 48,000
Capital ratio A : B = 20,000 : 30,000 = 2 : 3
A's capital share: 48,000 × 2⁄5 = 19,200
A's total: 12,000 + 19,200 = 31,200 → option (c)
Why the others are wrong
- (a)₹51,200 — It leaves B only 8,800 of the 60,000, but B is owed 3⁄5 of the remaining 48,000, which is 28,800.
- (b)₹41,200 — Take away the 12,000 fee and A's capital share would be 29,200, more than half of 48,000. A holds only 2⁄5 of the capital, so that share is 19,200.
- (d)₹21,200 — It is below 24,000, A's share with no management pay at all (2⁄5 × 60,000). Pay for managing can only raise A's share.
Concept
When one partner is paid for managing the business, that pay comes out of the profit first. Only what remains is divided in the ratio of capital × time.
So A is paid in two parts, the management pay and a capital share of the remainder, while B receives only a capital share.
The stem says only 'an additional 20% for management', not 20% of what. Taking it as 20% of the total profit, paid before the split, gives 31,200, the keyed option.
Reading it as a 20% bonus on A's capital weight (2.4 : 3) gives about 26,667, which no option matches.
Key facts
- Management pay is taken from the total profit before the capital split.
- Here A gets 12,000 for managing, and the 48,000 left is split 2 : 3 as 19,200 and 28,800.
- Check: A's 31,200 + B's 28,800 = 60,000.
Study next
Common traps
- Splitting the whole 60,000 in 2 : 3 and forgetting the management pay, which gives A only 24,000.
- Adding 20% to A's ordinary share (24,000 × 1.2 = 28,800) instead of paying 20% of the total profit first.
A managing fee taken off the top also appears at 21 Sep 2025, 16:00, Quant Q.7, where A takes 10% for managing and the remaining 90,000 is split by capital.
Related PYQs
No directly related past PYQ was found.