Question

Lucky, Paras and Palak are partners in a firm. Palak is guaranteed minimum profit of ₹ 40,000 as her share of profit, Paras is entitled to salary of ₹ 15,000 p.m.

The firm earned a profit of ₹ 90,000 for the year ended 31st March 2026 before allowing rent of ₹ 10,000 p.m. to Lucky for use of his property by the firm.

You are required to pass necessary Journal entries in the books of the firm.

Answer 1

Journal entries for the year ended on 31st March, 2026
Date	Particulars	L.F.	Dr.	Cr.
2026
March, 31	Rent A/с   ...Dr.		1,20,000
	To Rent Payable A/c			1,20,000
	(Rent allowed to Lucky)
March, 31	Profit & Loss A/c   ...Dr.		1,20,000
	To Rent A/c			1,20,000
	(Rent A/c closed)
March, 31	Lucky's Capital A/c   ...Dr.		10,000
	Paras's Capital A/c   ...Dr.		10,000
	Palak's Capital A/c   ...Dr.		10,000
	To Profit & Loss A/c			30,000
	(Net loss transferred to partners equally)
March, 31	Lucky's Capital A/c   ...Dr.		25,000
	Paras's Capital A/c   ...Dr.		25,000
	To Palak's Capital A/c			50,000
	(Shortfall in Palak's share of profit met by Lucky and Paras equally)

Working note:

If the profit-sharing ratio is not mentioned in the question, it is assumed that the partners share profits and losses equally.

Palak is guaranteed a minimum profit of ₹ 40,000. However, her share of the firm's loss is ₹ 10,000 (i.e., `1/3` of ₹ 30,000). Therefore, she should receive a total credit of ₹ 50,000 (₹ 40,000 guaranteed profit + ₹ 10,000 loss adjustment). This deficiency is borne equally by Lucky and Paras.

Since the firm has incurred a loss, Paras is not entitled to salary, as a partner's salary is payable only when there are sufficient profits, unless otherwise stated in the partnership agreement.