Question

$X,Y$ and $Z$ entered into partnership on 1st July, 2016 to share Profit and Losses in the ratio of $3:2:1$. $X$ personally guaranteed that $Z^{\prime }s$ share of profit after charging interest on capital @ $6\%$ per annum would not be less than $Rs.36,000$ p.a. The capital contributed by :$X-Rs.2,00,000;Y-Rs.1,00,000$ and $Z-Rs.1,00,000$. Profit for the year ended on 31st March, 2017 was $Rs.1,38,000$. Prepare Profit and Loss Appropriation Account.

Answer 1

Profit of 1,20,000 is to be distributed among partners as such

X= 1,20,000*3/6=60,000

Y=1,20,000*2/6=40,000

Z=1,20,000*1/6= 20,000

As Z's guaranteed profit is 36,000 for one year. So, for 9 months its (36000*9/12) = 27,000. The deficiency of Z is to be contributed by X. So, 7000(27,000-20,000) is paid by X.

PROFIT AND LOSS APPROPRIATION ACCOUNT

Particulars	Amount	Particulars	Amount
To Interest on capital X-2,00,000*6%*9/12=9000 Y-1,00,000*6%*9/12=4500 Z-1,00,000*6%*9/12=4500	18,000	By Net profit	1,38,000
To profit transferred to X-53,000 (60000 - 7000) Y-40,000 Z-27,000 (20000 + 7000)	1,20,000
Total	1,38,000	Total	1,38,000