Page No 2.96
Question 81:
A,
B
and C are partners in a firm sharing profits in the ratio of 3 : 2 :
1. They earned a profit of ` 30,000 during the year ended 31st March, 2021.
Distribute profit among A, B and C if:
(a) C's share of profit is guaranteed to be ` 6,000 Minimum.
(b) Minimum profit payable to C amounting to ` 6,000 is guaranteed by A.
(c) Guaranteed minimum profit of ` 6,000 payable to C is guaranteed by B.
(d) Any deficiency after making payment of guaranteed ` 6,000 will be borne by A and B in the
ratio of 3 : 1.
Answer:
Case (a)
Profit and Loss Appropriation Account 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Profit transferred to: 

Profit and Loss A/c 
30,000 

A’s Capital A/c 
14,400 



B’s Capital A/c 
9,600 



C’s Capital A/c 
6,000 
30,000 



30,000 

30,000 





Working Notes:
Profit = ` 30,000
Profit sharing ratio = 3 : 2 : 1
C is given a guarantee of minimum profit of ` 6,000
A’s
profit share= 30,000×3/6=15,000
B’s
profit share= 30,000×2/6=10,000
C’s
profit share= 30,000×1/6=5,000
Deficiency in C’s Profit Share = 6,000 ` 5,000 = ` 1,000
This deficiency is to be borne by A and B in their profit sharing ratio i.e. 3 : 2
Deficiency is to be borne by A= 1000×3/5=600
Deficiency is to be borne by b= 1000×2/5=400
Therefore,
Final Profit Share of A = 15,000 ` 600 = ` 14,400
Final Profit Share of B = 10,000 ` 400 = ` 9,600
Final Profit Share of C = 5,000 + 1,000 = ` 6,000
Case (b)
Profit and Loss Appropriation Account 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Profit transferred to: 

Profit and Loss A/c 
30,000 

A’s Capital A/c 
14,000 



B’s Capital A/c 
10,000 



C’s Capital A/c 
6,000 
30,000 



30,000 

30,000 





Working Notes:
Deficiency in C’s Profit Share = 6,000 ` 5,000 = ` 1,000
This deficiency is to be borne by A only.
Therefore,
Final Profit Share of A = 15,000 ` 1,000 = ` 14,000
Final Profit Share of B = 10,000
Final Profit Share of C = 5,000 + 1,000 = ` 6,000
Case (c)
Profit and Loss
Appropriation Account 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Profit transferred to: 

Profit and Loss A/c 
30,000 

A’s Capital A/c 
15,000 



B’s Capital A/c 
9,000 



C’s Capital A/c 
6,000 
30,000 



30,000 

30,000 





Working Notes:
Deficiency in C’s Profit Share = 6,000` 5,000 = ` 1,000
This deficiency is to be borne by B only.
Therefore,
Final Profit Share of A = 15,000
Final Profit Share of B = 10,000  ` 1,000 = ` 9,000
Final Profit Share of C = 5,000 + 1,000 = ` 6,000
Case (d)
Profit and Loss Appropriation Account 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Profit transferred to: 

Profit and Loss A/c 
30,000 

A’s Capital A/c 
14,250 



B’s Capital A/c 
9,750 



C’s Capital A/c 
6,000 
30,000 



30,000 

30,000 





Working Notes:
Deficiency in C’s Profit Share = 6,000  ` 5,000 = ` 1,000
This deficiency is to be borne by A and B in the ratio of 3:1.
Deficiency is to be borne by A= 1000×3/5=750
Deficiency is to be borne by B= 1000×1/5=250
Therefore,
Final Profit Share of A = 15,000  750 = ` 14,250
Final Profit Share of B = 10,000  250 = ` 9,750
Final Profit Share of C = 5,000 + 1,000 = ` 6,000
Page No 2.97
Question 82:
P, Q and R entered
into partnership on 1st April, 2018 to share profits and losses in the ratio of
12 : 8 : 5. It was provided that in no case R's share in profit be less then `30,000
p.a. The profits and losses for the period ended 31st March were: 2019 Profit `1,20,000;
2020 Profit `1,80,000; 2021 Loss
`1,20,000.
Pass the necessary Journal entries in the books of the firm.
Answer:
Journal 

Date 
Particulars 
L.F. 
Debit Amount (`) 
Credit Amount (`) 







2019 
P’s Capital A/c 
Dr. 

3,600 


Q’s Capital A/c 
Dr. 

2,400 


To R’s Capital A/c 



6,000 

(Deficiency adjusted) 










2021 
P’s Capital A/c 
Dr. 

32,400 


Q’s Capital A/c 
Dr. 

21,600 


To R’s Capital A/c 



54,000 

(Deficiency
adjusted) 










Working Notes:
WN1: Calculation of amount of deficiency
of R
R's Minimum Guaranteed Profit = ` 30,000 For 201819,
R's actual share of profit = 1,20,000 ×5/25=` 24,000
Deficiency in R's Profit = 30,000  24,000 = ` 6,000
This deficiency is to be borne by P & Q in the ratio of 12:8.
For 201819,
This deficiency is to be borne by P=6,000×12/20=3,600
This deficiency is to be borne by Q=6,000×8/20=2,400
WN2: R's actual share of profit = 1,80,000×5/25=` 36,000
This implies that there is no deficiency in R's profit share as his actual share exceeds his minimum
guaranteed share.
For 202021,
R's share of loss = 1,20,000×5/25=` 24,000
Deficiency in R's Profit = 30,000 + 24,000 = ` 54,000
This deficiency is to be borne by P & Q in the ratio of 12:8.
Page No 2.97
Question 83:
A and B are in
partnership sharing profits and losses in the ratio of 3 : 2. They admit C,
their Manager, as a partner with effect from 1st April, 2020, for 1/4th share
of profits.
C, while a Manager, was in receipt of a salary of ` 27,000 p.a. and a
commission of 10% of the net profits after charging such salary and commission.
In terms of the Partnership Deed, any excess amount, which C will be
entitled to receive as a partner over the amount which would have been due to
him if he continued to be the manager, would have to be personally borne by A
out of his share of profit. Profit for the year ended 31st March, 2021 amounted
to ` 2,25,000.
You are required to show Profit and Loss Appropriation Account for the year ended 31at March, 2021.
Answer:
Profit and Loss Appropriation Account for the year and March 31, 2021 

Dr. 


Cr. 

Particulars 
Amount ( `) 
Particulars 
Amount ( `) 

Profit transferred to: 

Profit and Loss A/c 
2,25,000 

A’s Capital A/c 
96,750 



B’s Capital A/c 
72,000 



C’s Capital A/c 
56,250 
2,25000 



2,25000 

2,25000 





Working Notes:
WN 1 Calculation of Remuneration to C as a Manager
Salary to C = ` 27,000
Commission to C = 10% of Net Profit after Salary and Commission
Net Profit after Salary and Commission = 2,25,000 27,000 = ` 1,98,000
C’s commission = 1,98,000×10/110=18,000
C’s
remuneration as Manager = Salary + Commission = 27,000 + 18,000 = ` 45,000
WN 2 Calculation
of Profit Share of C as a Partner
Profit = ` 2,25,000
C’s profit share = 2,25,000×1/4=56,250
Part of C’s Profit Share to be borne by A = 56,250  ` 45,000 = ` 11,250
Profit available for distribution between A and B =
2,25,000  45,000 = ` 1,80,000
A’s profit share = 1,80,000×3/5=1,08,000
C’s profit share = 1,80,000×2/5=72,000
A’s Profit share after adjusting C’s deficiency =
1,08,000  `
11,250 = `
96,750
Page No 2.97
Question 84:
Asgar, Chaman and Dholu are partners in a firm. Their Capital Accounts stood at `6,00,000; ` 5,00,000 and ` 4,00,000 respectively on 1st April, 2020. They shared Profits and Losses in the proportion of 4 : 2 : 3. Partners are entitled to interest on capital @ 8% per annum and salary to Chaman and Dholu @ `7,000 per month and `10,000 per quarter respectively as per the provision of the Partnership Deed.
Dholu's share of
profit (excluding interest on capital but including salary) is guaranteed at a
minimum of `1,10,000 p.a. Any
deficiency arising on that account shall be met by Asgar. The profit for the
year ended 31st March, 2021 amounted to ` 4,24,000.
Prepare Profit and Loss Appropriation Account for the year ended 31st March, 2021.
Answer:
Profit and Loss Appropriation Account 

Dr. 



Cr. 
Particulars 

Amount 
Particulars 
Amount 
Interest on Capital to: 


Profit and Loss A/c (Net
Profit) 
4,24,000 
Asgar’s Capital A/c 
48,000 



Chaman’s Capital A/c 
40,000 



Dholu’s Capital A/c 
32,000 
1,20,000 







Salary to Chaman (` 7,000 × 12) 
84,000 



Salary to Dholu (` 10,000 × 4) 
40,000 








Profit transferred to: 




Asgar’s Capital A/c 
70,000 



Chaman’s Capital A/c 
40,000 



Dholu’s Capital A/c 
70,000 
1,80,000 




4,24,000 

4,24,000 


Working Notes:
Profit available
for distribution = 4,24,000 – (1,20,000 + 84,000+ 40,000) = ` 1,80,000
Profit sharing ratio = 4 : 2 : 3
Asgar’s profit share = 1,80,000×4/9=80,000
Chaman’s profit share = 1,80,000×2/9=40,000
Dhalu’s profit share = 1,80,000×3/9=60,000
Dholu’s Minimum Guaranteed Profit = ` 1,10,000 (excluding interest on capital, but
including salary)
Dholu’s Minimum Guaranteed Profit (excluding
salary) = 1,10,000 – 40,000
= ` 70,000
But, Dholu’s Actual Profit Share = ` 60,000
Deficiency in Dholu’s Profit Share = 70,000 – 60,000 = 10,000
This deficiency is to be borne by Asgar alone.
Therefore,
Asgar’s New Profit Share = 80,000 – 10,000 = ` 70,000
Page
No 2.97
Question 85:
The partners of a
firm, Alia, Bhanu and Chand distributed the profits for the year ended 31st
March, 2017, ` 80,000 in the ratio
of 3 : 3 : 2 without providing for the following adjustments:
(a) Alia and Chand were entitled to a salary of ` 1,500 each p.a.
(b) Bhanu was entitled for a commission of ` 4,000.
(c) Bhanu and Chand had guaranteed a minimum profit of ` 35,000 p.a. to Alia any deficiency to borne equally by Bhanu
and Chand.
Pass the necessary Journal entry for the above adjustments in the books of the
firm. Show workings clearly.
Answer:
In the books of
Mudit, Sudhir and Uday Journal 

Date 
Particulars 

L.F. 
Debit Amount ( `) 
Credit Amount ( `) 
2017 





March 31 
Bhanu’s Capital A/c 
Dr. 

21,000 


Chand’s Capital A/c 
Dr. 

2,000 


To Alia’s Capital
A/c 



23,000 

(Being adjustment entry
passed for rectification of errors) 




Working Notes:
Table Showing
Adjustment 

Particulars 
Alia’s Capital
A/c 
Bhanu’s Capital
A/c 
Chand’s Capital
A/c 
Firm 


Dr. 
Cr. 
Dr. 
Cr. 
Dr. 
Cr. 
Dr. 
Cr. 
Profits wrongly Distributed
(Dr.) 
30,000 

30,000 

20,000 


80,000 
Salary to be provided (Cr.) 

18,000 



18,000 
36,000 

Commission to be provided
(Cr.) 



4,000 


4,000 

Profits correctly
distributed 

35,000 

5,000 

Nil 
40,000 

Balance
to be adjusted 
23,000(Cr.) 
21,000(Dr.) 
2,000(Dr.) 
Nil 
Divisible Profits 
= 
Profits before
appropriation – (Salary + Bhanu’s Commission) 

= 
`
[80,000 – (36,000 + 4,000)] = ` 40,000 
Alia’s Share of Profits 
= 
`
(40,000 × 3/8) = 15,000 
Deficiency in Alia’s Share
of Profits 
= 
`
(35,000 – 15,000) = ` 20,000 (To be borne by Bhanu and Chand in 1 : 1) 
Alia’
final share of Profits 
= 
` 35,000 
Bhanu’s
final share of Profits 
= 
` [(40,000 × 3/8) – 10,000] = ` 5,000 
Chand’s
final share of Profits 
= 
` [(40,000 × 2/8) – 10,000] = Nil 
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