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Question -

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 ₹ 5,000. The profits for the year ending March 31, 2017 amounts to ₹ 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.



Answer -

Profit and Loss Appropriation Account

 

Dr.

 

 

 

 

Cr.

 

Particulars

Amount

₹

Particulars

Amount

₹

Profit transferred to

 

 

Profit and Loss

 

35,000

Radha’s Capital

17,500

 

 

 

 

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

(900)

16,600

 

 

 

 

 

 

 

 

 

 

 

Mary’s Capital

14,000

 

 

 

 

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

(600)

13,400

 

 

 

 

 

 

 

 

 

Fatima’s Capital

3,500

 

 

 

 

Add: Deficiency born by

 

 

 

 

 

Radha

900

 

 

 

 

Mary

600

5,000

 

 

 

 

 

 

 

 

 

 

 

 

35,000

 

 

35,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

₹

Credit

Amount

₹

 

 

 

 

 

 

 

Profit and Loss Appropriation A/c

Dr.

 

35,000

 

 

To Radha’s Capital A/c

 

 

 

16,600

 

To Mary’s Capital A/c

 

 

 

13,400

 

To Fatima’s Capital A/c

 

 

 

5,000

 

(Profit distributed among Partners)

 

 

 

 

 

 

 

 

 

 

 

AlternativeMethod

Journal

 

Date

Particulars

L.F.

Debit

Amount

₹

Credit

Amount

₹

 

Profit and Loss Appropriation A/c

Dr.

 

35,000

 

 

To Radha’s Capital A/c

 

 

 

17,500

 

To Mary’s Capital A/c

 

 

 

14,000

 

To Fatima’s Capital A/c

 

 

 

3,500

 

(Profit distributed among Partners)

 

 

 

 

 

 

 

 

 

 

 

Radha’s Capital A/c

Dr.

 

900

 

 

Mary’s Capital A/c

Dr.

 

600

 

 

To Fatima’s Capital A/c

 

 

 

1,500

 

(Deficiency of Fatima’s Share taken from Radha and

Mary) 

 

 

 

 

 

 

 

 

 

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