Question

E and F were partners in a firm sharing profits in the ratio of $7:3$. On $1-4-2014$ they admitted Gas a new partner for $1/5^{th}$ share in the profit with a guaranteed profit of Rs. $60,000$. The new profit sharing ratio between E and F will remain the same but they agreed to bear any deficiency on account of guarantee to G in the ratio of $3:7$. The profit of the firm for the year ended $31-3-2015$ was Rs. $2,70,000$.
Prepare Profit and Loss Appropriation Account of E, F and G for the year ended $31-3-2015$.

Answer 1

Working Notes:
G's Share in profit $=2,70,000\times \frac{1}{5}=Rs.54,000$
Minimum Guaranteed Profit to G $=Rs.60,000$
Deficiency $=Rs.6,000(60,000-54,000)$
Deficiency to be borne by E and F in the ratio of $3:7$
Amount to be borne by E $=6,000\times \frac{3}{10}=Rs.1,800$
Amount to be borne by F $=6,000\times \frac{7}{10}=Rs4,200$
Remaining Profit to be distribution between E and F in the ratio of $7:3$
$\therefore$ E's Profit Share $=2,10,000\times \frac{7}{10}=Rs.1,47,000$ & F's Profit Share $=2,10,000\times \frac{3}{10}=Rs.63,000$.