Question 92 Chapter 2 of +2-A
92. Three Chartered Accountants A, B and C form a partnership, profits being shared in the ratio of
3 : 2: 1 subject to the following:
- C’s share of profit guaranteed to be not less than 15,000 p.a.
- B 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 are 75,000. The gross fee earned by B for the firm is 16,000. You are required to show Profit and Loss Appropriation Account after giving
effect to the above
The solution of Question 92 Chapter 2 of +2-A:
| Balance Sheet (for the year ended 31st March 2019) |
|||||
| Liabilities |
Amount | Assets |
Amount | ||
| By Profit and Loss A/c | 75,000 | ||||
| By B’s Capital A/c (Deficiency in Revenue) | 9,000 | ||||
| To Profit Transferred to *2 | |||||
| A’s Capital A/c | 41,400 | ||||
| B’s Capital A/c | 27,600 | ||||
| C’s Capital A/c | 15,000 | 84,000 | |||
| 84,000 | 84,000 | ||||
Profit Already credited
Profit of the year =84,000
Profit-sharing Ratio =3 : 2: 1
| A’s Share of Profit | 84,000 | X | 3 |
| 6 |
A’s Share of Profit= 42,000
| B’s Share of Profit | 84,000 | X | 2 |
| 6 |
B’s Share of Profit = 28,000
| C’s Share of Profit | 84,000 | X | 1 |
| 6 | |||
C’s Share of Profit = 14,000
C’s Minimum Guaranteed Profit = Rs 15,000
C’s Actual Profit Share i.e. 14,000 is less than his Minimum Guaranteed Profit i.e. 15,000
Deficiency in Alia’s Profit Share = 15,000 − 14,000= Rs 1,000
This deficiency of Rs 20,000 is to be borne by A and B in the ratio of 3: 2
| A’s Share of Profit | 1,000 | X | 3 |
| 5 |
A’s Share of Profit = 600
| B’s Share of Profit | 1,000 | X | 2 |
| 5 |
B’s Share of Profit = 400
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Now, Final distributed among the partners
| A’s Share of Profit | = | 42,000 | – | 600 | =41,400 |
| B’s Share of Profit | = | 28,000 | – | 400 | =27,600 |
| C’s Share of Profit | = | 14,000 | + | 1,000 | =15,000 |
Note: – In the book, they have shown the net share of final profit to B is Rs 18,600 (27,600- 9,000), So, we have shown it in the solution of Rs 27,600. The deficiency of Rs 9,000 that was guaranteed by B to the firm would not be deducted from his share as he is bearing it in the form of profit.
Also, Check out the solved question of previous Chapters: –
T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)
- Chapter No. 1 – Financial Statement of Not-For-Profit Organisations
- Chapter No. 2 – Accounting for Partnership Firms – Fundamentals
- Chapter No. 3 – Goodwill: Nature and Valuation
- Chapter No. 4 – Change in Profit-Sharing Ratio Among the Existing Partners
- Chapter No. 5 – Admission of a Partner
- Chapter No. 6 – Retirement/Death of a Partner
- Chapter No. 7 – Dissolution of a Partnership Firm
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 8 – Company Accounts – Accounting for Share Capital
- Chapter No. 9 – Company Accounts – Issue of Debentures
- Chapter No. 10 – Redemption of Debentures
T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)
- Chapter No. 1 – Financial Statements of a Company
- Chapter No. 2 – Financial Statement Analysis
- Chapter No. 3 – Tools of Financial Statement Analysis – Comparative Statements and Common- Size Statements
- Chapter No. 4 – Accounting Ratios
- Chapter No. 5 – Cash Flow Statement
Check out T.S. Grewal +2 Book 2020@ Official Website of Sultan Chand Publication
