Question

Amit, Babita and Sona form a partnership firm, sharing profits in the ratio of 3 : 2 : 1, subject to the following :

(i)	Sona’s share in the profits, guaranteed to be not less than Rs 15,000 in any year.
(ii)	Babita gives guarantee to the effect that gross fee earned by her for the firm shall be equal to her average gross fee of the proceeding five years, when she was carrying on profession alone (which is Rs 25,000). The net profit for the year ended March 31, 2017 is Rs 75,000. The gross fee earned by Babita for the firm was Rs 16,000.

You are required to show Profit and Loss Appropriation Account (after giving effect to the alone).

Answer 1

Profit and Loss Appropriation Account as on March 31, 2017
Dr.						Cr.
Particulars				Amount Rs	Particulars	Amount Rs
Profit Transferred to					Profit and Loss	75,000
Amit’s Capital {84,000 × (3/6)}			42,000		Babita’s Capital	9,000
Less: Sona’s share of deficiency {1,000 × (3/5)}			(600)	41,400	(Deficiency of Fees 25,000 – 16,000)
Babita’s Capital {84,000 × (2/6)}			28,000
Less: Sona’s share of deficiency {1,000 × (2/5)}			(400)	27,600
Sona’s Capital {84,000 × (1/6)}			14,000
Add: Deficiency received from
Amit			600
Babita			400	15,000
				84,000		84,000