Question

A has given guarantee to C for minimum 10,000 profit. At year end, the firm suffered loss and c's share in the loss was 2000. Calculate amount of deficiency to be borne by A. (a) 2000

(b) 10,000

(d) None of these

(c) 12000

Answer 1

ANSWER :

❖ Option (c) Rs. 12,000

• ✎ If A has given guarentee to C for minimum Rs. 10,000 profit and at year end, the firm suffered loss and C's share in the loss was Rs 2,000; then the amount deficiency to be borne by A will be Rs. 12,000.

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SOLUTION :

❒ Given :-

• A has given guarentee to C for minimum Rs. 10,000 profit.

• The firm suffered loss and C's share in the loss was Rs 2,000 at the end of the year.

❒ To Calculate :-

• Amount of Deficiency borne by A = ?

❒ Note :-

• ⊚ If a minimum amount of profit is guaranteed to a partner by the existing partner(s); then the guaranteed amount of profit must be paid even if there is no profit or the profit is insufficient to give him the guaranteed minimum amount as his share of profit or there is loss suffered by the business. So, when the actual share of profit of the guaranteed partner is less than the guaranteed amount of his share, then the deficiency will be borne by the partner(s) who has guaranteed the other partner in their profit sharing ratio or in the agreed ratio, if any.

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❒ Calculation :-

It is given that,

• Amount of profit guaranteed to C by A = Rs. 10,000

• C's Share of Loss of the firm = Rs. 2,000

So,

• ★ Total loss of C = Rs. 10,000 + Rs. 2,000

• ➨ Total loss of C = Rs. 12,000

Thus,

• C will be credited with the total loss of Rs. 12,000.

Since,

• The deficiency is to be borne by A.

Hence,

• ✪ The amount of deficiency borne by A = Rs. 12,000