Question

Ashok, Brijesh and Cheena are partners sharing profits and losses in the ratio of 2 : 2 : 1. Ashok and Brijesh have guaranteed that Cheena share in any year shall be less than Rs 20,000. The net profit for the year ended March 31, 2017 amounted to Rs 70,000. Prepare Profit and Loss Appropriation Account.

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				70,000
Ashok’s Capital					28,000
Less: Cheena’s share of deficiency {6,000 × (1/2)}					(3,000)	25,000
Brijesh’s Capital					28,000
Less: Cheena’s share of deficiency {6,000 × (1/2)}					(3,000)	25,000
Cheena’s Capital		14,000
Add: Deficiency received from
Ashok					3,000
Brijesh					3,000	20,000
						70,000					70,000