Question

P and Q were partners in a firm sharing profits in the ratio of 5:3. On 1-4-2014 they admitted R as a new partner for 1/8th share in the profits with a guaranteed profit of Rs 75,000. The new profit sharing ratio between P and Q will remain the same but they agreed to bear any deficiency on account of guarantee to R in the ratio 3:2. The profit of the firm for the year ended 31-3-2015 was Rs 4,00,000.

Prepare Profit & Loss Appropriation A/c of P, Q and R for the year ended 31-3-2015.

Answer 1

Profit & Loss Appropriation Accoun of P,Q and R

Dr. for the year ended 31st March, 2015 Cr.

$\begin{array}{cccc}\text{Particulars}& \text{Rs}& \text{Particulars}& \text{Rs}\\ \text{Partner's Capital A/cs:}& & \text{Profit and Loss A/c}& \\ \text{(Transfer of Profit)}& & \text{(Net Profit)}& 4,00,000\\ P2,18,750& & & \\ \text{Less: Deficiency}15,000& 2,03,750& & \\ Q\overline{1,31,250}& & & \\ \text{Less: Deficiency}10,000& 1,21,250& & \\ R\overline{50,000}& & & \\ \text{Add: From P}15,000& & & \\ \text{From Q}\underset{–}{10,000}& 75,000& & \\ & \underset{–}{\overline{4,00,000}}& & \underset{–}{\overline{4,00,000}}\end{array}$

$\begin{array}{cc}\text{Working Note:}& \text{Rs}\\ \text{Profit of the firm}& 4,00,000\\ \text{R's share of profit =Rs 4,00,000}\times \frac{1}{8}& 50,000\\ \text{Balance to be divided between P \& Q}& \underset{–}{\overline{3,50,000}}\end{array}$

P's share of Profit $=Rs3,50,000\times \frac{5}{8}=Rs2,18,750$

Q's share of Profit $=Rs3,50,000\times \frac{3}{8}=Rs1,31,250$

R's deficiency =Rs 75,000 - Rs 50,000 = Rs 25,000

P's contribution to R's Deficiency $=Rs25,000\times \frac{3}{5}=Rs15,000$

Q's contribution to R's Deficiency $=Rs25,000\times \frac{2}{5}=Rs10,000$