Question

A, B and C are partners in a firm sharing profits in the ratio of 3 : 2 : 1. They earned a profit of ₹ 30,000 during 2017-18. Distribute profit among A, B and C if:
(a) C’s share of profit is guaranteed to be ₹ 6,000 Minimum.
(b) Minimum profit payable to C amounting to ₹ 6,000 is guaranteed by A.
(c) Guaranteed minimum profit of ₹ 6,000 payable to C is guaranteed by B.
(d) Any deficiency after making payment of guaranteed ₹ 6,000 will be borne by A and B in the ratio of 3 : 1.

Answer 1

Solution:

Case (a)

                         Profit and Loss Appropriation Account  

Dr                                                                                                                Cr  

Particulars                               Rs.         Particulars                           Rs.

To Profit transferred to :                    By Net Profit b/d                 30,000

A's Capital A/c        14,400

B's Capital A/c        9,600

C's Capital A/c        6,000   30,000                                                          

                                             30,000                                              30,000  

Working Notes :

Profit = 30, 000

Profit sharing ratio= 3 : 2 : 1

C is given a guarantee of minimum profit of 6, 000

A's Profit Share = 30, 000 x $\frac{3}{6}$  =15 000

B's Profit Share = 30, 000 x $\frac{2}{6}$ = 10,000

C's Profit Share =30, 000 x $\frac{1}{6}$  = 5 000

Deficiency in C's Profit Share = 6, 000 - 5, 000 = 1, 000

This deficiency is to be borne by A and B in their profit sharing ratio i.e. 3 : 2  Deficiency borne by A = 1, 000 x $\frac{3}{5}$  = 600

Deficiency borne by B = 1, 000 x $\frac{2}{5}$ =400  

Therefore, Final Profit Share of A =15, 000 - 600 = 14, 400

Final Profit Share of B = 10, 000 - 400 =9, 600

Final Profit Share of C = 5, 000 + 1, 000 = 6, 000

Case (b)  

                        Profit and Loss Appropriation Account  

Dr                                                                                                                     Cr  

Particulars                              Rs.      Particulars                                 Rs.

To Profit transferred to :               By Profit and Loss A/c            30,000

A's Capital A/c      14,000

B's Capital A/c      10,000

C's Capital A/c      6,000     30,000

                                             30,000                                                30,000  

Working Notes :

Deficiency in C's Profit Share = Rs.6,000 - Rs.5,000 = Rs.1,000

This deficiency is to be borne by A only

Therefore. Final Profit Share of A = Rs.15,000 - Rs.1,000 = Rs.14,000  

Final Profit Share of B = Rs.10,000

Final Profit Share of C = Rs.5,000 + Rs.1,000 = Rs.6,000

Case (c)

                              Profit and Loss Appropriation Account  

Dr                                                                                                                  Cr  

Particulars                         Rs.        Particulars                                       Rs.

To Profit transferred to :            By Profit and Loss A/c                   30,000

A's Capital A/c     15,000

B's Capital A/c      9,000

Cs Capital A/c      6,000    30,000

                                           30,000                                                     30,000  

Working Notes:

Deficiency in Cs Profit Share = Rs.6,000 - Rs.5,000 = Rs.1,000

This deficiency is to be borne by B only

Therefore, Final Profit Share of A = Rs.15,000

Final Profit Share of B = Rs.10,000 - Rs.1,000 =  9,000

Final Profit Share of C = Rs.5,000 + Rs.1,000 = Rs.6,000  

Case (d)  

                           Profit and Loss Appropriation Account  

Dr                                                                                                                Cr  

Particulars                             Rs.                 Particulars                            Rs.

To Profit transferred to :                   By Profit and Loss A/c             30,000

A's Capital A/c        14,250

B's Capital A/c         9,750

C's Capital A/c         6,000   30,000  

                                               30,000                                                   30,000

Deficiency in Cs Profit Share = 6,000 - 5000 = 1,000

This deficiency is to be bane by A and Bin the ratio of 3:1

Deficiency borne by A =1,000 x $\frac{3}{4}$ =750  

Deficiency borne by B =1,000 x $\frac{1}{4}$ =250  

Therefore, Final Profit Share of A = 15,000- 750 = 14,250

                  Final Profit Share of B =10,000 - 250= 9,750

                   Final Profit Share of C =5,000 + 1,000 =6,000