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Question -

Pinki, Deepati and Kaku are partner’s sharing profits in the ratio of 5:4:1. Kaku is given a guarantee that his share of profits in any given year would not be less than ₹ 5,000. Deficiency, if any, would be borne by Pinki and Deepti equally. Profits for the year amounted to ₹ 40,000. Record necessary journal entries in the books of the firm showing the distribution of profit.



Answer -

Profit and Loss Appropriation Account

Dr.

 

 

 

 

Cr.

Particulars

Amount

₹

Particulars

Amount

₹

Profit transferred to

 

 

Profit & Loss

 

40,000

Pinki’s Capital

20,000

 

 

 

 

Less: Gurantee to Kaku 

{1,000 × (1/2)}

(500)

19,500

 

 

 

 

 

 

 

 

 

 

 

Deepti’s Capital

16,000

 

 

 

 

Less: Guarantee to Kaku 

{1,000 × (1/2)}

(500)

15,500

 

 

 

 

 

 

 

 

 

Kaku’s Capital

4,000

 

 

 

 

Add: Deficiency received from

 

 

 

 

 

Pinki

500

 

 

 

 

Deepti

500

5,000

 

 

 

 

 

 

 

 

 

 

 

 

40,000

 

 

40,000

 

 

 

 

 

 

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