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.
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
