Question

X, Y, and Z are in Partnership, sharing profits and losses in the ratio of 3:2:1 respectively. Z's share in the profit is guaranteed by X and Y to be a minimum of Rs 8,000. The net profit for the year ended March 31, 2006 was Rs 30,000. Prepare profit and loss asppropriation account, indicating the amount final due to each partner.

Answer 1

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

$\begin{array}{cccccc}\text{Particulars}& & \text{Amt. (Rs)}& \text{Particulars}& & \text{Amt. (Rs)}\\ \text{Profit Transferred to}& & & \text{Profit and Loss}& & 30,000\\ \text{X's Capital A/c}& 15,000& & & & \\ \text{(-) Z's Deficiency}& \underset{–}{(1,800)}& 13,200& & & \\ \text{Y's Capital A/c}& 10,000& & & & \\ \text{(-Z's Deficiency)}& \underset{–}{1,200}& 8,800& & & \\ \text{Z's Capital A/c}& 5,000& & & & \\ \text{(+) Deficiency Borne by}& & & & & \\ \text{X}& 1,800& & & & \\ \text{Y}& \underset{–}{1,200}& 8,000& & & \\ & & \underset{–}{\underset{–}{\overline{30,000}}}& & & \underset{–}{\underset{–}{\overline{30,000}}}\end{array}$

Note Share of X in Z's deficiency $=3,000\times \frac{3}{5}=1,800$

Share of Y in Z's deficiency $=3,000\times \frac{2}{5}=1,200$

Z's deficiency = Guaranteed profit - Acutal share

= 8,000 - 5,000

= Rs 3,000