Question

X and Y were sharing profits in the ratio of 2 : 1. On 1st April, 2023, they admitted Z for `1/4`th share in the profits. Z is guaranteed a minimum profit of ₹ 1,00,000 for the year. Any deficiency in Z’s share is to be borne by X and Y in the ratio of 3 : 2. Losses for the year ending 31st March, 2024, amounted to ₹ 1,20,000. Record necessary entries.

Answer 1

Journal Entry
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	X’s Capital A/c   ...Dr.		60,000	-
	Y’s Capital A/c   ...Dr.		30,000	-
	Z’s Capital A/c   ...Dr.		30,000	-
	To Profit and Loss A/c		-	1,20,000
	(Being loss of ₹ 1,20,000 distributed among partners in their profit-sharing ratio.)
	X’s Capital A/c   ...Dr.		78,000	-
	Y’s Capital A/c   ...Dr.		52,000	-
	To Z’s Capital A/c		-	1,30,000
	(Being deficiency in Z’s share adjusted by X and Y in the ratio of 3 : 2.)

Working Notes:

(i) Z’s Share of Loss = `1,20,000 xx 1/4`

= 30,000

Remaining Loss = 1,20,000 − 30,000

= 90,000

X’s Share of Loss = `90,000 xx 2/3`

= 60,000

Y’s Share of Loss = `90,000 xx 1/3`

= 30,000

(ii) Z is guaranteed a minimum profit of ₹ 1,00,000, whereas the share of the loss debited to his capital account is ₹ 30,000. Hence, he will be credited by ₹ 1,30,000 borne by Ankur and Bobby in the ratio of 3 : 2.