Question

Pranshu and Himanshu are partners sharing profits and losses in the ratio of 3 : 2 respectively. They admit Anshu as partner with 1/6 share in the profits of the firm. Pranshu personally guaranteed that Anshu's share of profit would not be less than ₹ 30,000 in any year. The net profit of the firm for the ear ending 31st March, 2013 was ₹ 90,000 .
Prepare Profit and Loss Appropriation Account.

Answer 1

Profit and Loss Appropriation Account for the year ended March 31, 2013
Dr.						Cr.
Particulars			Amount (Rs)	Particulars	Amount (Rs)
Profit transferred to:				Profit & Loss A/c	90,000
Pranshu’s Capital A/c		30,000
Himanshu’s Capital A/c		30,000
Anshu’s Capital A/c		30,000	90,000
			90,000		90,000

Working Notes:

WN1: Calculation of New Profit Sharing Ratio

Old ratio = 3 : 2

Let the total share of the firm be Re 1

Anshu is admitted for 1/6^th share in profits

WN2:Distribution of Profit