Question

Three Chartered Accountants $X,Y$ and $Z$ form a partnership sharing profits and losses in the ratio of $3:2:1$ subject to the following conditions:
(1) $Z^{\prime }s$ share of profits is guaranteed to be not less than $Rs.30,000$ p.a.
(ii) $Y$ gives a guarantee to the effect that the gross fee earned by him for the firm shall not be less than the average gross fee earned by him during the preceding five years when he was carrying on the profession alone (the average ofwhich works out at $Rs.50,000$).
Profit for the first year (year ended 31st March, 2018) of the partnership is $Rs.1,50,000$. The gross fee earned by $Y$ for the firm is $Rs.32,000$.
Prepare Profit and Loss Appropriation Account after giving effect to the above.

Answer 1

Notes:- The profit sharing ratio is 3:2:1. Z has been guaranteed a profit of 30,000.The deficiency of 2000 will be contributed by X and Y in the ratio of 3:2.

PROFIT AND LOSS APPROPRIATION ACCOUNT

Particulars	Amount	Particulars	Amount
To Profit T/f to: X's capital - 84,000 Less:Z's Deficiency (1200)	82,800	By net profit	1,50,000
Y's capital - 56,000 Less:- (800)	55,200	By Y's capital A/c (50,000-32,000)	18,000
Z's capital A/c 28,000 Add:-X's share 1200 Y's share 800	30,000
Total	1,68,000	Total	1,68,000