Question

Ali, Bimal and Deepak are partners in a firm. On 1st April, 2023 their capital accounts stood at ₹ 4,00,000, ₹ 3,00,000 and ₹ 2,00,000 respectively. They shared profits and losses in the proportion of 5 : 3 : 2. Partners are entitled to interest on capital @ 10% per annum and a salary to Bimal and Deepak @ ₹ 2,000 per month and ₹ 3,000 per quarter, respectively, as per the provisions of the partnership deed.

Bimal’s share of profit (excluding interest on capital but including salary) is guaranteed at a minimum of ₹ 50,000 p.a. Any deficiency arising on that account shall be met by Deepak. The profits of the firm for the year ended 31st March, 2024, amounted to ₹ 2,00,000. Prepare Profit and Loss Appropriation Account for the year ended on 31st March, 2024.

Answer 1

Dr.	Profit and Loss Appropriation Account for the year ended 31st March, 2024				Cr.
Particulars	Amount (₹)	Amount (₹)	Particulars	Amount (₹)	Amount (₹)
To Interest on Capital:		90,000	By Profit and Loss A/c (Net Profit)		2,00,000
Ali	40,000
Bimal	30,000
Deepak	20,000
To Salary A/c		36,000
Bimal (2,000 × 12)	24,000
Deepak (3,000 × 4)	12,000
To Balance c/d		74,000
		2,00,000			2,00,000
To Net Profit transferred to:			By Balance b/d		74,000
Ali’s Capital A/c		37,000
Bimal’s Capital A/c	22,200	26,000
Add: Transferred from Deepak	3,800
Deepak’s Capital A/c	14,800	11,000
Less: Transferred to Bheem	3,800
		74,000			74,000

Working Notes:

(i) Share of Profit = 74,000

Profit Sharing Ratio = 5 : 3 : 2

Ali’s Profit Share = `74,000 xx 5/10`

= 37,000

Bimal’s Profit Share = `74,000 xx 3/10`

= 22,200

Deepak’s Profit Share = `74,000 xx 2/10`

= 14,800

(ii) Guaranteed Profit Part:

Bimal’s Minimum Guaranteed Profit = 50,000

Salary included = 24,000

So guaranteed profit portion = 50,000 − 24,000

= 26,000

(iii) Deficiency:

Bimal’s actual share = 22,200

Required = 26,000

Deficiency = 26,000 − 22,200

= 3,800

(iv) Deficiency borne by Deepak alone:

Deepak’s original share = 14,800

New share = 14,800 − 3,800

= 11,000