Question

Pinki, Deepti and Kaku are partner's sharing profits in the ratio of 5 : 4 : 1 Kaku is given a guarantee that his share of profits in any given year would not be less than Rs 5,000. Deficiency, if any, would be borne by Pinki and Deepti equally, Profits for the year amounted to Rs 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.

Answer 1

$\begin{array}{ccccccccccccc}\text{Dr}& & & & & & \text{Profit and Loss Appropriation Account}& & & & & & \text{Cr}\end{array}$

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Profit Transferred to}& & & \text{Profit and Loss}& & 40,000\\ \text{Pinki's Capital}& 20,000& & & & \\ (-)\frac{1}{2}\text{of Kaku's deficiency}& \left(500\right)& 19,500& & & \\ \text{Deepti's Capital}& \overline{16,000}& & & & \\ (-)\frac{1}{2}\text{of Kaku's Deficiency}& \left(500\right)& 15,500& & & \\ \text{Kaku's Capital}& \overline{4,000}& & & & \\ \text{(+) Guarantee by}\text{Pinki and Deepti}& \underset{–}{1,000}& 5,000& & & \\ & & \underset{–}{\underset{–}{\overline{40,000}}}& & & \underset{–}{\underset{–}{\overline{40,000}}}\end{array}$