Jai and Veeru were in partnership sharing profits and losses in the ratio of 4:1. In appreciation of the service of their employeeGabbar who was in receipt of salary of Rs. 4,800 p.a. and a commission of 5% on the net profits after charging such salary and commission, they took him into partnership as from 1-4-2018 giving him 1/8 share of the profit. The agreement provided that any excess over his former remuneration to which Gabbar becomes entitled will be paid out of Jai’s share of profits.
The profits for the year ended 31st March, 2019 amounted to Rs. 1,14,000. Show the distribution of profit.
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Calculation of share of profit
Particulars A B C
Share of Profit 18000
(31500 *4)/7 9000
(31500*2)/7 4500
(31500*1)/7
Less: Deficiency 2000
(3000 * 2)/3 1000
(3000*1)/3 Nil
Add: Share from partners Nil Nil 3000
Total 16000 8000 7500
Note :
C's guranteed profit was Rs. 7500, as per profit sharing ration C is getting Rs. 4500. Therefore remaining Rs. 3000 is given to C by A and B in their profit sharing ratio.
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