Guarantee
of Minimum Profit to a Partner
Question 76:
A, B and C
were in partnership sharing profits and losses in the ratio of 4 :2 : 1. It was provided that C’s share in profit for a
year would not be less than `75,000. Profit for the year ended 31st March, 2025
amounted to `3,15,000. You
are required to show the appropriation among the partners. The Profit and Loss
Appropriation Account is not required.
Answer;
Working
notes;
|
Profit and loss
appropriation account for year ended 31st March, 2025 |
|||
|
Particulars |
` |
Particulars |
` |
|
To
Profit A- 1,60,000 B- 80,000 C-
75,000 |
3,15,000 |
By
net profit |
3,15,000 |
|
|
3,15,000 |
|
3,15,000 |
Note: initial profit
distributed 30,000 in 4;2 or 2:1 in the absence of any information in the
question No profit and loss a/c is required we can appropriate as below;
Appropriation of profit
|
A-
1,80,000-20,000 =1,60,000 B-
90,000-10,000 =
80,000 C-
45,000+30,000 = 75,000 |
|
3,15,000 |
Question 77: Asha, Disha and Raghav were partners in
a firm sharing profits in the ratio of 2:3:1. According to the partnership
agreement, Raghav was guaranteed an amount of Rs.
40,000 as his share of profits. The net profit for the year ended 31st March,
2022 amounted to 1,20,000.
Prepare
Profit & Loss Appropriation Account of the firm for the year ended 31st
March, 2022. (CBSE 2024)
Answer:
|
Particulars |
Rs. |
Particulars |
Rs. |
|
To profit transferred to; |
|
By P&L A/c |
1,20,000 |
|
Asha’s Capital A/c |
32,000 |
|
|
|
Disha’s Capital A/c |
48,000 |
|
|
|
Raghav’s Capital A/c |
40,000 |
|
|
|
|
|
|
|
|
|
1,20,000 |
|
1,20,000 |
Working Notes:
|
|
Asha |
Disha |
Raghav |
|
Profit as per 2:3:1 |
40,000 |
60,000 |
20,000 |
|
Deficiency Adjusted |
(8,000) |
(12,000) |
20,000 |
|
Share
of each partner |
32,000 |
48,000 |
40,000 |
Question
78:
X, Y and Z entered into partnership on 1st
October, 2024 to share profits in the ratio of 4 : 3 :
3. X, personally guaranteed
that Z's share of profit after charging interest on capital @ 10% p.a. would
not be less then ` 80,000 in any year. Capital
contributions were: X – ` 3,00,000, Y – ` 2,00,000 and Z – ` 1,50,000.
Profit for the year ended 31st March, 2025 was `
1,60,000. Prepare Profit and Loss Appropriation Account.
Answer:
|
Profit
and Loss Appropriation Account for the year ended March 31, 2025 |
||||
|
Dr. |
|
Cr. |
||
|
Particulars |
( `) |
Particulars |
( `) |
|
|
Interest on
Capital: |
|
Net Profit b/d |
1,60,000 |
|
|
X’s Capital a/c |
15,000 |
|
|
|
|
Y’s Capital a/c |
10,000 |
|
|
|
|
Z’s Capital a/c |
7,500 |
32,500 |
|
|
|
Profit transferred to: |
|
|
|
|
|
X (51,000 – 1,750) |
49,250 |
|
|
|
|
Y (38,250) |
38,250 |
|
|
|
|
Z (38,250 + 1,750) |
40,000 |
1,27,500 |
|
|
|
|
1,60,000 |
|
1,60,000 |
|
|
|
|
|
|
|
Note: Since Z is admitted on 1st
October, 2024 and Profit is ascertained on March 31, 2024, therefore,
interest on capital is calculated for 6 months and guaranteed amount is
considered as ` 40,000 (half of the total amount).
Question
79:
A, B and C are partners sharing profits in the
ratio of 5 : 4 : 1. C is given a guarantee that his minimum share of profit in any
given year would be at least
`
50,000. Deficiency, if any, would be borne by A and B equally.
Profit for the year ended 31st March 2025 was `
4,00,000.
Pass necessary Journal entries in the books of the firm.
Answer:
|
Profit
and Loss Appropriation Account for the year ended 2025 |
||||
|
Dr. |
|
Cr. |
||
|
Particulars |
( `) |
Particulars |
( `) |
|
|
Profit transferred
to: |
|
Profit and Loss A/c (Net Profit) |
4,00,000 |
|
|
A’s Capital A/c |
1,95,000 |
|
|
|
|
B’s Capital A/c |
1,55,000 |
|
|
|
|
C’s Capital A/c |
50,000 |
4,00,000 |
|
|
|
|
4,00,000 |
|
4,00,000 |
|
|
|
|
|
|
|
Working Notes:
Profit for
the year = ` 4,00,000
Profit
sharing ratio = 5 : 4 : 1
C is given a
guarantee of minimum profit of ` 50,000
A’s profit
share =4,00,000×5/10=2,00,000
B’s profit
share =4,00,000×4/10=1,60,000
C’s profit
share =4,00,000×1/10=40,000
Deficiency in C’s share = 5,000- ` 4,000 = ` 1,000
This
deficiency is to be borne by A and B equally.
Deficiency
is to be borne by A=10,000×1/2=5,000
Deficiency
is to be borne by B=10,000×1/2=5,000
Therefore,
Final Profit
Share of A = 2,00,000 – 5,000 = ` 1,95,000
Final Profit
Share of B = 1,60,000 -5,000 = ` 1,55,000
Final Profit
Share of C = 40,000 + 10,000 = ` 50,000
Question 80: Atul, Bipul and
Charu are partners sharing profits equally. Bipul is guaranteed minimum profit of `2,00,000 per
annum. Salary is payable to Bipul of `10,000 per month. Net Profit for the
year ended 31st March, 2025 is `6,60,000.
Prepare
Profit & Loss Appropriation Account for the year.
Answer:
|
Profit & Loss Appropriation A/c |
|||
|
Particulars |
` |
Particulars |
` |
|
To Bipul’s Capital A/C (Salary) |
1,20,000 |
By Profit
and loss a/c |
6,60,000 |
|
To Profit
transferred to: |
|
(Profit) |
|
|
Atul’s Capital A/c |
1,70,000 |
|
|
|
Bipul’s Capital A/c |
2,00,000 |
|
|
|
Charu’s Capital A/c |
1,70,000 |
|
|
|
|
6,60,000 |
|
6,60,000 |
Working Notes:
Profit after
Bipul’s salary = 6,60,000
-1,20,000
Divisible
Profit = 5,40,000
Share of
Profits mas per profit sharing ratio 1:1:1
= 5,40,000÷3= 1,80,000
Guarantee of
profit = 2,00,000
Deficiency
of profit =2,00,000-1,80,000= 20,000
Deficiency
of profit will be adjusted by Atul and Charu in 1:1
=
20,000÷2=10,000
|
Adjustment Table of Profit |
|||
|
Partner |
Atul |
Bipul |
Charu |
|
Share of
Profits mas per profit sharing ratio 1:1:1 |
1,80,000 |
1,80,000 |
1,80,000 |
|
Adjustment
of Profit |
(-) 10,000 |
(+) 20,000 |
(-) 10,000 |
|
Final share of profit |
1,70,000 |
2,00,000 |
1,70,000 |