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E and F Were Partners in a Firm Sharing Profits in the Ratio of 7:3. on 1-4-2014 They Admitted G as a New Partner for 1/5th Share in the Profit with a Guaranteed Profit of Rs.60,000. the New Profit Sharing Ratio Between E and F Will Remain the Same but They Agreed to Bear Any Deficiency on Account of Guarantee to G in the Ratio of 3:7. - Accountancy

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E and F were partners in a firm sharing profits in the ratio of 7:3. On 1-4-2014 they admitted G as a new partner for 1/5th share in the profit with a guaranteed profit of Rs.60,000. The new profit sharing ratio between E and F will remain the same but they agreed to bear any deficiency on account of guarantee to G in the ratio of 3:7. The profit of the firm for the year ended 31-3-2015 was Rs.2,70,000.

Prepare Profit and Loss Appropriation Account of E, F and G for the year ended 31-3-2015.

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Solution

                                                                            Profit and Loss Appropriation Account

                                                                                 for the year ended March 31,2015

Dr.                                                                                                                                                                                                               Cr.

Particulars Amount (Rs.) Particulars Amount (Rs.)

To Profit transferred to :

      E’s Capital A/c                                         1,47,000

      F’s Capital A/c                                            63,000

      G’s Capital A/c                                           60,000

 

 

 

2,70,000

By Profit and Loss A/c

 

 

 

2,70,000

 

 

 

  2,70,000   2,70,000

Working Notes :

G's Share in Profit = 2,70,000 x (1/5) = 54,000

Minimum Guranteed Profit to G = 60,000

Deficiency = 6,000 (60,000 - 54,000)

Deficiency to be borne by E and F in the ratio of 3 :7

Amount to be borne by E = 6,000 x (3/10) = 1,800

Amount to be borne by F = 6,000 x (7/10) = 4,200

Remaining Profit to be distributed between E and F in the ratio of 7:3

∴ E's Profit Share = 2,10,000 x (7/10) = 1,47,000

and F's Profit Share = 2,10,000 x (3/10) = 63,000

Concept: Preparation of Profit and Loss Appropriation Account
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