Question

Sachin and Rahul are the partners sharing profit and loss in the ratio of 3:2.they admit gurve for 1/6 share in profit and garentee that his share of profit will not be less than25000.total profit of the firm was 90000. Calculate share of profit for each partner when the garentee is given by rahul.
Prepare profit and loss appropriation account

Answer 1

Given:

• Sachin and Rahul are partners in a firm, sharing profits and losses in the ratio 3:2.
• Gurve is admitted into the firm for 1/6th share of profits/losses.
• Rahul guaranteed a minimum of Rs 25,000 to Gurve.
• The profit of the firm was Rs 90,000.

To find: The profit share of each partner and to prepare a Profit & Loss Appropriation Account.

Answer:

• Sachin's old share = 3/5
• Rahul's old share = 2/5

• Gurve's share = 1/6

Let's assume the total profits to be 1.

Remaining profit = 1 - 1/6 = 5/6

The remaining profit will be distributed among Sachin and Rahul in their old profit-sharing ratio to find the new profit-sharing ratio.

Calculation of the new profit-sharing ratio:

For Sachin:

• New ratio = 5/6 × 3/5 = 15/30

For Rahul:

• New ratio = 5/6 × 2/5 = 10/30

For Gurve:

• New ratio = 1/6, or 5/30

Therefore, the new profit-sharing ratio is 15:10:5 or 3:2:1.

Calculation of the profit distribution:

Since they now share their profits and losses in the ratio 3:2:1, the profit will be distributed accordingly.

For Sachin:

• Profit share = Rs 90,000 × 3/6 = Rs 45,000

For Rahul:

• Profit share = Rs 90,000 × 2/6 = Rs 30,000

For Gurve:

• Profit share = Rs 90,000 × 1/6 = Rs 15,000

Deficiency of Gurve = Guaranteed profit - Actual profit acquired

Deficiency of Gurve = Rs 25,000 - Rs 15,000

Deficiency of Gurve = Rs 10,000

Since the guarantee was made by Rahul, the deficiency will be deducted from Rahul's share and added to Gurve's share.

Corrected profit distribution:

For Sachin:

• Profit share = Rs 45,000

For Rahul:

• Profit share = Rs 30,000 - Rs 10,000 = Rs 20,000

For Gurve:

• Profit share = Rs 15,000 + Rs 10,000 = Rs 25,000

Therefore, the profit share of each partner is Rs 45,000, Rs 20,000 and Rs 25,000.