(Guarantee by a partner) A, B and C were partners in a firm sharing profits in 2:3:5 ratio. A was guaranteed a minimum profit of 1,00,000 Any deficiency on this account was to be borne by C. The profit of the firm for the year ended 31-3-2020 was 4,50,000. Prepare Profit and Loss Appropriation Account of A, B and C for the year ended 31-3-2020.
Answers
Answered by
1
Given:
- A, B and C were partners in a firm, sharing profits and losses in the ratio 2:3:5.
- A was guaranteed a minimum profit of Rs 1,00,000 by C.
- The profit for the year was Rs 4,50,000.
Objective: To prepare a Profit & Loss Appropriation A/c.
Answer:
Calculation of profit distribution:
Since they share their profits and losses in the ratio 2:3:5, it will be distributed accordingly.
For A:
- Profit share = Rs 4,50,000 × 2/10 = Rs 90,000
For B:
- Profit share = Rs 4,50,000 × 3/10 = Rs 1,35,000
For C:
- Profit share = Rs 4,50,000 × 5/10 = Rs 2,25,000
A is to get a minimum of Rs 1,00,000 but is getting only Rs 90,000. As per the question, the deficiency is to be borne by C.
Deficiency of A = Guaranteed share - Actual share acquired
Deficiency of A = Rs 1,00,000 - Rs 90,000
Deficiency of A = Rs 10,000
The deficiency will be deducted from C's share and added to A's share.
Corrected profit distribution:
For A:
- Profit share = Rs 90,000 + Rs 10,000 = Rs 1,00,000
For B:
- Profit share = Rs 1,35,000
For C:
- Profit share = Rs 2,25,000 - Rs 10,000 = Rs 2,15,000
The Profit & Loss Appropriation A/c has been attached below.
Attachments:
Similar questions