Question

A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. They earned a profit of ₹ 30,000 during the year ended 31st March, 2019. Distribute profit among A, B and C if:
(a) C's share of profit is guaranteed to be ₹ 6,000 Minimum.
(b) Minimum profit payable to C amounting to ₹ 6,000 is guaranteed by A.
(c) Guaranteed minimum profit of ₹ 6,000 payable to C is guaranteed by B.
(d) Any deficiency after making payment of guaranteed ₹ 6,000 will be borne by A and B in the ratio of 3 : 1.

Answer 1

Case (a)

Profit and Loss Appropriation Account for the year ended 31st March, 2019
Dr.				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Profit transferred to:			Profit and Loss A/c	30,000
A’s Capital A/c	14,400
B’s Capital A/c	9,600
C’s Capital A/c	6,000	30,000
		30,000		30,000

Working Notes:

Profit = Rs 30,000

Profit sharing ratio = 3 : 2 : 1

C is given a guarantee of minimum profit of Rs 6,000

Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000

This deficiency is to be borne by A and B in their profit sharing ratio i.e. 3 : 2

Therefore,

Final Profit Share of A = 15,000 − 600 = Rs 14,400

Final Profit Share of B = 10,000 − 400 = Rs 9,600

Final Profit Share of C = 5,000 + 1,000 = Rs 6,000

Case (b)

Profit and Loss Appropriation Account for the year ended 31st March, 2019
Dr.				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Profit transferred to:			Profit and Loss A/c	30,000
A’s Capital A/c	14,000
B’s Capital A/c	10,000
C’s Capital A/c	6,000	30,000
		30,000		30,000

Working Notes:

Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000

This deficiency is to be borne by A only.

Therefore,

Final Profit Share of A = 15,000 − 1,000 = Rs 14,000

Final Profit Share of B = 10,000

Final Profit Share of C = 5,000 + 1,000 = Rs 6,000

Case (c)

Profit and Loss Appropriation Account for the year ended 31st March, 2019
Dr.				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Profit transferred to:			Profit and Loss A/c	30,000
A’s Capital A/c	15,000
B’s Capital A/c	9,000
C’s Capital A/c	6,000	30,000
		30,000		30,000

Working Notes:

Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000

This deficiency is to be borne by B only.

Therefore,

Final Profit Share of A = 15,000

Final Profit Share of B = 10,000 − 1,000 = Rs 9,000

Final Profit Share of C = 5,000 + 1,000 = Rs 6,000

Case (d)

Profit and Loss Appropriation Account for the year ended 31st March, 2019
Dr.				Cr.
Particulars		Amount (₹)	Particulars	Amount (₹)
Profit transferred to:			Profit and Loss A/c	30,000
A’s Capital A/c	14,250
B’s Capital A/c	9,750
C’s Capital A/c	6,000	30,000
		30,000		30,000

Working Notes:

Deficiency in C’s Profit Share = 6,000 − 5,000 = Rs 1,000

This deficiency is to be borne by A and B in the ratio of 3 : 1.

Therefore,

Final Profit Share of A = 15,000 − 750 = Rs 14,250

Final Profit Share of B = 10,000 − 250 = Rs 9,750

Final Profit Share of C = 5,000 + 1,000 = Rs 6,000