Question

A and B are partners sharing profits in the ratio of 3 : 2. C was admitted for 1/6th share of profit with a minimum guaranteed amount of ₹ 10,000. At the close of the first financial year the firm earned a profit of ₹ 54,000. Find out the share of profit which A, B and C will get.

Answer 1

Profit and Loss Appropriation Account
Dr.				Cr.
Particulars		Amount Rs	Particulars	Amount Rs
Profit transferred to:			Profit and Loss A/c (Net Profit)	54,000
A	26,400
B	17,600
C	10,000	54,000
		54,000		54,000

Working Note

C will get higher of the two:

(i) Share of Profit as per profit sharing ratio, i.e.,

(ii) Minimum guaranteed profit, i.e. Rs 10,000

Thus from net profit of Rs 54,000, minimum guaranteed profit to C of Rs 10,000 is to be adjusted first.

And the balance profit of Rs 44,000 (54,000 – 10,000) is to be shared by A and B in the ratio 3:2