Question

A, B and C were in partnership sharing profits and losses in the ratio of 4 : 2 : 1. It was provided that C's share in profit for a year would not be less then ₹ 7,500. Profit for the year ended 31st March, 2019 amounted to ₹ 31,500. You are required to show the appropriation among the partners. The profit and Loss Appropriation Account is not required.

Answer 1

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 (Net Profit)	31,500
A’s Capital A/c	16,000
B’s Capital A/c	8,000
C’s Capital A/c	7,500	31,500
		31,500		31,500

Working Notes:

Profit for the year = Rs 31,500

Profit sharing ratio = 4 : 2 : 1

C is given a guarantee of minimum profit of Rs 7,500

C’s Actual Profit Share (i.e. Rs 4,500) is less than his Minimum Guaranteed Profit (i.e. Rs 7,500)
∴ Deficiency in C’s Profit Share = 7,500 − 4,500 = Rs 3,000

This deficiency is to be borne by A and B in their profit sharing ratio i.e. 4 : 2

Therefore,

Final Profit Share of A = 18,000 − 2,000 = Rs 16,000

Final Profit Share of B = 9,000 − 1,000 = Rs 8,000

Final Profit Share of C = 4,500 + 3,000 = Rs 7,500