Question

The _______ is paid to new partner if his share of profit as per the profit sharing ratio is less then the guaranteed amount

• A. minimum gaurantee amount
• B. maximum gaurantee amount
• C. less gaurantee amount
• D. high gaurantee amount

Answer 1

The correct option is A minimum gaurantee amount

Profit & Loss in partnership is a predefined term as per the partnership deed. Partners are supposed to share the profit & loss based on the defined profit sharing ratio.

Sometimes, a minimum guarantee is given to the new partner to safeguard interest of the new entrant.

Minimum guaranteed amount is that amount which a partner is supposed to get if his share of profit is less than the guaranteed amount.

For example, A, B and C are three partners with equal profit sharing ratio with a minimum guaranteed clause of Rs.150000/- to Mr.A. If the profit of the business is Rs.300000/- The profit as per agreed sharing ratio will be as under:

A - Rs.150000/- as profit based on sharing ratio is Rs.100000/- is lower than the minimum guaranteed amount.

Balance Rs.150000/- will be shared by B and C equally.