Question

Explain briefly the meaning of guarantee of minimum profit.

Answer 1

Sometimes the share of a newly admitted partner is guaranteed at a certain minimum amount. The guarantee may be given by one or all of the old partners. In such situation,the share of each partner without considering the guarantee clause is calculated. If the guaranteed partner's share fall short of the minimum amount,then the shortage is made good by the transfer of share from the share of the partner giving the guarantee.

In case where all the partners have the given the guarantee,the share is contributed by them in their profit sharing ratio.