Question

$P$ and $Q$ were partners in a firm sharing profits in the ratio of $5:3$. On 1st April, 2014 they admitted $R$ as a new partner for $\frac{1}{8}th$ 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 31st March, 2015 was $Rs.4,00,000$.
Prepare Profit and Loss Appropriation Account of $P,Q$ and $R$ for the year ended 31st March, 2015.

Answer 1

Calculation of New profit sharing Ratio

Let total share be 1.

Share of incoming partner= 1-1/8=7/8

P's New Share= 7/8*5/8=35/64

Q's New Share =7/8*3/8=21/64

R's share = 8/64

Share of partners in profit :

P's share=4,00,000*35/64=2,18,750

Q's share=4,00,000*21/64=1,31,250

R's share=4,00,000*8/64=50,000

R's share of deficiency i.e 25,000 is to be borne by P and Q in the ratio of 3:2.

PROFIT AND LOSS APPROPRIATION ACCOUNT

Particulars	Amount	Particulars	Amount
To profit transferred to : P's capital A/c 2,18,750 Less:R's share (15,000) Q's capital A/c 1,31,250 Less:R's share (10,000) R's capital A/c 50,000 Add:share from P&Q 25,000	4,00,000	By net profit	4,00,000
Total	4,00,000	Total	4,00,000