Question

Jain and Gupta were partners in a firm sharing profits and losses in the ratio of 3 : 1. On 1^st April, 2024, Agarwal was admitted as a new partner for 1/5^th share in the profits of the firm with a minimum guaranteed amount of ₹ 75,000. Any deficiency arising out of this account will be borne by Jain and Gupta in the ratio of 1 : 3. During the year ended 31^st March, 2025, the firm earned a net profit of ₹ 3,00,000.

Prepare Profit and Loss Appropriation Account of Jain, Gupta and Agarwal for the year ended 31^st March, 2025.

Answer 1

Dr.	Profit and Loss Appropriation Account for the year ended 31st March, 2025		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Jain’s CapitalA/c	1,76,250	By Profit & Loss A/c (Net profit)	3,00,000
To Gupta’s Capital A/c	48,750
To Agarwal’s Capital A/c	75,000
	3,00,000		3,00,000

Working Note:

1. Calculate Agarwal’s Share and Deficiency

• Total Net Profit: ₹ 3,00,000
• Agarwal’s Share `(1/5): 3,00,000 xx 1/5 = 60,000`
• Guaranteed Amount: ₹ 75,000
• Deficiency: 75,000 − 60,000 = 15,000

2. Distribute Initial Profit to Jain and Gupta

• Remaining Profit: ₹ 3,00,000 − ₹ 60,000 = ₹ 2,40,000
• Jain’s Initial Share `(3/4): 2,40,000 xx 3/4 = 1,80,000`
• Gupta’s Initial Share `(1/4): 2,40,000 xx 1/4 = 60,000`

3. Apportion the Deficiency

The deficiency of ₹ 15,000 is borne by Jain and Gupta in the ratio of 1 : 3.

Jain’s Contribution: `15,000 xx 1/4 = 3,750`

Gupta’s Contribution: `15,000 xx 3/4 = 11,250`

4. Final Profit Distribution

Jain: 1,80,000 − 3,750 = 1,76,250

Gupta: 60,000 − 11,250 = 48,750

Agarwal: 60,000 + 15,000 = 75,000