Question

Pranshu and Himanshu are partners sharing profits and losses in the ratio of 3 : 2 respectively. They admit Anshu as partner with 1/6 share in the profits of the firm. Pranshu personally guaranteed that Anshu’s share of profit would not be less than ₹ 30,000 in any year. The net profit of the firm for the ear ending 31st March, 2013 was ₹ 90,000. Prepare Profit and Loss Appropriation Account.

Answer 1

Solution:

                              Profit and Loss Appropriation Account

                                  for the year ended March 31,2013  

Dr                                                                                                                     Cr  

Particulars                                   Rs.        Particulars                                  Rs. To Profit transferred to :                          By Profit and Loss A/c            90,000 Pranshus's Capital A/c   30,000                      (Net Profit)

Himanshu's Capital A/c 30,000

Amin,' s Capital A/c       30,000    90,000  

                                                        90,000                                             90,000  

Working Notes: 1:

Calculation of New Profit Sharing Ratio Old ratio = 3:2

Let the total share of the firm be Re 1

Anshu is admitted for $\frac{1}{6}$ th share in profits

Pranshu's New Share = $\frac{3}{5}$ x $\frac{5}{6}$ = $\frac{15}{30}$

Himanshu's New Share= $\frac{2}{5}$ x $\frac{5}{6}$ = $\frac{10}{30}$

Anshu's Share = $\frac{1}{6}$ or $\frac{5}{30}$

New Profit Sharing Ratio = 15 : 10 : 5 or 3:2:1  

2: Distribution of Profit  

Ansh's Share of Profit = 90,000 x $\frac{1}{6}$  = 15,000

Deficiency of '15,000 in Anshu's share of profit will be borne by Pranshu Pranshu's Share of Profit = 90,000 x $\frac{3}{6}$ = 45,000

Pranshu's actual share of profit (after bearing deficiency)

                                               = 30,000 (45,000 - 15,000)

Himanshu's Share of Profit = 90,000 x $\frac{2}{6}$ = 30,000