Question

Amit, Namit and Sumit were in partnership Amit and Namit sharing profit and losses in the ratio of 4 : 3 and Sumit receiving a salary of R24000 pa. plus a commission of 10% of the profits after charging his salary and commission, or 1/6 of the net profit of the firm whichever is more Any excess of the later over the former received by Sumit is, under the partnership deed, to be borne by Amit and Namit in the ratio of 3:2. The profit of the firm for the year ending 311 march came to 396000 after charging Sumit
salary.​

Answer 1

Following is the calculation for distribution of profits :-

Explanation:

given, Amit and Namit profit sharing ratio is 4:3.

profit after charging Sumit's salary = ₹3,96,000

sumit is to be given a commission of 10 % of the profits after charging his salary and commission or 1/6 of net profit whichever is more, any excess of latter over the former will be borne by Amit and sumit in the ratio of 3:2.

so first we will calculate sumit's share in both cases :-

1) 10% commission on profits after charging his salary and commission =

  = profit after charging sumit's salary * 10/110 ( here 100+10 is taken for 10 % commission because the commission is to be charged after charging such commission.)

 = 3,96,000 * 10/110

 = 36,000

2) total net profit of the firm = profit after charging sumit's salary + sumit's

   salary

             = 3,96,000 + 24,000

             = ₹ 4,20,000

sumit's share = 1/6 pf net profit = 4,20,000 * 1/6 = ₹70,000

now, we can see, sumit's share through net profit is more than through commission so he will be given his share through net profit = ₹ 70,000.

the excess between his share through commission and his share through net profit, is = share from net profit - share through commission

= 70,000 - 36,000

=₹ 34,000

this excess of ₹ 34,000 will be borne by Amit and namit in ratio of 3:2.

Amit's will bear = 34,000 * 3/5

                         = ₹20,400

namit will bear = 34,000 * 2/5

                         = ₹13,600

now, we will calculate Amit and namit's share of profits ( in the ratio 4:3 ), after deducting the excess to be borne by them for sumit's share :-

profit after charging sumit's salary and his 1/6 share of net profit =

= 3,96,000 - 70,000

= ₹ 3,26,000

Amit's share of profit after deducting excess borne by him =

= (3,26,000 * 4/7) - 20,400

= ₹ 1,65,886.

namit's share of profit after deducting excess borne by him =

= (3,26,000 * 3/7) - 13,600

= ₹ 1,26,114.