Question 77 Chapter 2 of +2-A
77. A, B and C were in partnership sharing profits and losses in the ratio of 4 : 2 : 1. It was provided that C's share in profit for a year would not be less than 7,500. Profit for the year ended 31st March 2019 amounted to 31,500. You are required to show the appropriation among the partners. The profit and Loss Appropriation Account is not required.
Balance Sheet (for the year ended 31st March 2019)
| Liabilities |
Amount | Assets |
Amount | ||
|---|---|---|---|---|---|
| By Profit and Loss A/c | 31,500 | ||||
| To Profit Transferred to *2 | |||||
| A’s Capital A/c | 16,000 | ||||
| B's Capital A/c | 8,000 | ||||
| C's Capital A/c | 7,500 | 31,500 | |||
| 31,500 | 31,500 | ||||
Working Note: -
*1 Calculation of Remuneration to C as a Manager
| Profit for the year | = | 31,500/- |
| Profit-sharing ratio | = | 4: 2: 1 |
C is given a guarantee of a minimum profit of Rs 7,500
| A's Share of Profit | = | 31,500 | X | 4 |
| 7 |
A's Share of Profit= 18,000
| B's Share of Profit | = | 31,500 | X | 2 |
| 7 |
B's Share of Profit= 9,000
| C's Share of Profit | = | 31,500 | X | 1 |
| 7 |
C's Share of Profit = 4,500
| C's Profit Share | = | 6,44,000 | X | 1 |
| 5 | ||||
| = | 1,28,800/- |
C’s Actual Profit Share i.e. Rs 4,500 is less than his Minimum Guaranteed Profit i. e. Rs7, 500
Deficiency in C’s Profit Share = 7,500 − 4,500 = Rs 3,000
This deficiency is to be borne by A and B in their profit sharing ratio i.e. 4 : 2
| A's Share of Profit | = | 3,000 | X | 4 |
| 7 |
A's Share of Profit = 2,000
| B's Share of Profit | = | 3,000 | X | 2 |
| 7 |
B's Share of Profit = 1,000
Now, Final distributed among the partners
| A's Share of Profit | = | 18,000-2,000 = 16,000 |
| B's Share of Profit = | 9,000- 1,000 = 8,000 | |
| C's Share of Profit = | 4,500 + 3,000 = 7,500 |
Also, Check out the solved question of previous Chapters: -
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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