Question 91:
Three Chartered Accountants Abhijit, Baljit and
Charanjit form a partnership, profits being shared in the ratio of 3 : 2 : 1
subject to the following:
(a) Charanjitshare of profit guaranteed to be not less than ₹ 15,000
p.a.
(b) Baljit gives a guarantee to the effect that gross fee earned by him for the
firm shall be equal to his average gross fee of the preceding five years when
he was carrying on profession alone, which on an average works out at ₹
25,000.
The profit for the first year of the partnership are ₹75,000. The gross
fee earned by Baljit for the firm is ₹16,000. You are required to show
Profit and Loss Appropriation Account after giving effect to the above.
Answer:
|
Profit and Loss Appropriation Account |
||||
|
Dr. |
|
|
Cr. |
|
|
Particulars |
₹ |
Particulars |
₹ |
|
|
Profit transferred to: |
|
Profit and Loss A/c |
75,000 |
|
|
Abhijit’s Capital A/c |
41,400 |
|
(Net Profit) |
|
|
Baljits Capital A/c |
18,600 |
|
B’s Capital A/c |
|
|
Charanjits Capital A/c |
15,000 |
84,000 |
(Deficiency in Revenue) |
9,000 |
|
|
|
|||
|
|
84,000 |
|
84,000 |
|
|
|
|
|
|
|
Working Notes:
1. Deficiency in
revenue guaranteed by Baljit
= ₹25,000 – ₹16,000 = ₹9,000
(To be borne by Baljit and added to the firm’s profit)
2. Total profit for
distribution
= ₹75,000 + ₹9,000 = ₹84,000
3. Profit sharing ratio = 3 : 2 : 1
o Abhijit's share = ₹84,000 × 3/6 = ₹42,000
o Baljit's share = ₹84,000 × 2/6 = ₹28,000
o Charanjit's share = ₹84,000 × 1/6 = ₹14,000
4. Charanjit is
guaranteed ₹15,000
Shortfall = ₹15,000 – ₹14,000 = ₹1,000
To be borne by Abhijit and Baljit in 3:2 ratio:
o Abhijit = ₹1,000 × 3/5 = ₹600
o Baljit = ₹1,000 × 2/5 = ₹400
5. Final adjusted shares:
o Abhijit = ₹42,000 – ₹600 = ₹41,400
o Baljit = ₹28,000 – ₹400 – ₹9,000 = ₹18,600
o Charanjit = ₹14,000 + ₹1,000 = ₹15,000
Past Adjustments and Guarantee of Profits
Question 92:
The partners of a firm, Alia, Bhanu and Chand distributed the profits for the year ended 31st March, 2026, ₹8,00,000 in the ratio of 3:3:2 without providing for the following adjustments:
(a) Alia and Chand were entitled to a salary of ₹15,000 each per month.
(b) Bhanu was entitled for commission of ₹40,000.
(c) Bhanu and Chand had guaranteed minimum profit of ₹3,50,000 per annum to Alia. Any deficiency to be borne equally by Bhanu and Chand.
Pass the necessary adjusting Journal entry in the books of the firm. Show working clearly.
Answer:
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In the books of Alia, Bhanu and Chand Journal |
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Date |
Particulars |
|
L.F. |
Debit (₹) |
Credit (₹) |
|
2017 |
|
|
|
|
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|
March 31 |
Bhanu’s Capital A/c |
Dr. |
|
2,10,000 |
|
|
|
Chand’s Capital A/c |
Dr. |
|
20,000 |
|
|
|
To Alia’s Capital A/c |
|
|
|
2,30,000 |
|
|
(Being adjustment entry passed for rectification of errors) |
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|
|
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Working Notes:
|
Table Showing Adjustment |
||||||||
|
Particulars |
Alia’s Capital A/c |
Bhanu’s Capital A/c |
Chand’s Capital A/c |
Firm |
||||
|
|
Dr. |
Cr. |
Dr. |
Cr. |
Dr. |
Cr. |
Dr. |
Cr. |
|
Profits wrongly Distributed (Dr.) |
3,00,000 |
|
3,00,000 |
|
2,00,000 |
|
|
8,00,000 |
|
Salary to be provided (Cr.) |
|
1,80,000 |
|
|
|
1,80,000 |
3,60,000 |
|
|
Commission to be provided (Cr.) |
|
|
|
40,000 |
|
|
40,000 |
|
|
Profits correctly distributed |
|
3,50,000 |
|
50,000 |
|
Nil |
4,00,000 |
|
|
Balance to be adjusted |
2,30,000(Cr.) |
2,10,000(Dr.) |
20,000(Dr.) |
Nil |
||||
|
Divisible Profits |
= |
Profits before appropriation – (Salary + Bhanu’s Commission) |
|
|
= |
₹ [8,00,000 – (3,60,000 + 40,000)] = ₹ 4,00,000 |
|
Alia’s Share of Profits |
= |
₹ (4,00,000 × 3/8) = 1,50,000 |
|
Deficiency in Alia’s Share of Profits |
= |
₹ (3,50,000 – 1,50,000) = ₹ 2,00,000 (To be borne by Bhanu and Chand in 1:1) |
|
Alia’ final share of Profits |
= |
₹ 3,50,000 |
|
Bhanu’s final share of Profits |
= |
₹ [(4,00,000 × 3/8) – 1,00,000] = ₹ 5,000 |
|
Chand’s final share of Profits |
= |
₹ [(4,00,000 × 2/8) – 1,00,000] = Nil |
Ts Grewal Solution 2026-2027
Click below for more Questions
Class 12 | Volume I
Chapter 1 – Accounting For Partnership Firms Fundamentals
Question No. 1 To 5
Question No. 6 To 10
Question No. 11 To 15
Question No. 16 To 20
Question No. 21 To 25
Question No. 26 To 30
Question No. 31 To 35
Question No. 36 To 40
Question No. 41 To 45
Question No. 46 To 50
Question No. 51 To 55
Question No. 56 To 60
Question No. 61 To 65
Question No. 66 To 70
Question No. 71 To 75
Question No. 76 To 80
Question No. 81 To 85
Question No. 86 To 90
Question No. 91 And 92