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Radha, Mary and Fatima Are Partners Sharing Profits in the Ratio of 5:4:1. - Accountancy

Journal Entry

Radha, Mary and Fatima are partners sharing profits in the ratio of 5:4:1. Fatima is given a guarantee that her share of profit, in any year will not be less than Rs 5,000. The profits for the year ending March 31, 2017 amounts to Rs 35,000. Shortfall if any, in the profits guaranteed to Fatima is to be borne by Radha and Mary in the ratio of 3:2. Record necessary journal entry to show distribution of profit among partner.

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Solution

Profit and Loss Appropriation Account

Dr.                                                                                 Cr.

Particulars

Amount

Rs

Particulars

Amount

Rs

Profit transferred to

 

Profit and Loss

35,000

Radha’s Capital

17,500

 

16,600

 

 

Less: Fatima’s Deficiency {1,500 × (3/5)}

(900)

 

Mary’s Capital

14,000

 

13,400

 

Less: Fatima’s Deficiency {1,500 × (2/5)}

(600)

 

Fatima’s Capital

3,500

 

 

 

5,000

 

Add: Deficiency born by 

 

 

Radha

900

 

Mary

600

 

 

35,000

 

35,000

Journal

Date Particulars L.F. Debit
Amount Rs
Credit Amount Rs
  Profit and Loss Appropriation A/c              Dr.
  To Radha’s 
Capital A/c
  To Mary’s Capital A/c
  To Fatima’s Capital A/c
(Profit distributed among Partners)
  35000

16600

13400

5000

Alternative Method

Journal

Date Particulars L.F. Debit Amount Rs Credit Amount Rs
  Profit and Loss Appropriation A/c                  Dr
 To Radha’s 
Capital A/c
 To Mary’s Capital A/c
 To Fatima’s Capital A/c
(Profit distributed among Partners)
  35000

17500

14000

3500

  Radha’s Capital A/c                   Dr.
Mary’s Capital A/c                   Dr.
    To Fatima’s Capital A/c
(Deficiency of Fatima’s Share taken from Radha and Mary)
 

900

600

1500
Concept: Guarantee of Profits to a Partner
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APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 2 Accounting for Partnership : Basic Concepts
Numerical Questions | Q 30 | Page 105
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