Question

Three Chartered Accountants Abhijit, Baljit and Charanjit form apartnership, profits being shared in the
ratio of 3:2:1 subject to the following:
(a) Charanjit's share of profit guaranteed to be not less than 15,000 p.a.
(b) Baljit gives a guarantee to the effect that gross fee earned by him for the firm shall be equal to his average gross fee of the preceding five years when he was carrying on profession alone, which on an
average works out at 25,000.
The profit for the first year of the partnership is 75,000. The gross fee earned by Baljit for the firm is 16,000. You are required to show Profit and Loss Appropriation Account after giving effect to the above.​

Answer 1

in this picture answer is available

Answer 2

Working Notes:

Shortage in revenue guaranteed by Baljit is 25,000 - 16,000 = 9,000

So profit should be = 75,000 + 9,000

= 84,000

Ratio of Profit sharing is 3 : 2 : 1

Abhijit’s share = 84,000 × 3/6 = 42,000

Baljit’s share = 84,000 × 2/6 = 28,000

Charanjit’s share = 84,000 × 1/6 = 14,000

Charanjit’s guaranteed minimum profit = 15,000

Shortage in Charanjit’s Profit = 15,000 - 14,000 = 1,000

Shortage to be borne by Abhijit = 1000 × 3/5 = 600

Shortage to be borne by Baljit = 1000 × 2/5 = 400

Therefore, Abhijit’s Final Share = 42,000 - 600 = 41,400

Baljit’s final Share = 28,000 - 400 = 27,600 - 9,000 = 18,600

Charanjit’s final Share = 14,000 + 1,000 = 15,000

                    Profit and Loss Appropriation Account

Dr.     Cr.

Particulars Amount

` Particulars Amount

`

Profit posted to:                      Profit and Loss A/c

(Net Profit)    75,000

Abhijit’s Capital A/c 41,400   Baljit’s Capital A/c  

Baljit’s Capital A/c 18,600   (Shortage in Revenue) 9,000

Charanjit’s Capital A/c 15,000 84,000    

 84,000   84,000