A, B and C are partners sharing profits in the ratio of 5 :4: 1. C is given a guarantee that his minimum share of profit in any given year would be at least Rs. 5,000. Deficiency, if any, would be borne by A and B equally. The profit for the year 2017-18 amounted to Rs. 40,000. Pass necessary Journal entries in the books of the firm.

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Solution

Share of profit
A- 40,0005/10= 20,000
B-40,0004/10=16,000
C-40,000*1/10=4000
C's share is less by 1000. So,the deficiency will be borne by A and B equally.
Journal entry for the same will be :
A's capital A/c Dr. 500
B's capital A/c Dr. 500
To C's capital A/c 1000
(Being deficiency contributed)

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