79 :- A, B, and C are partners sharing profits in the ratio of 5:4:1. C is given a guarantee that his minimum share of profits in any year would be at least Rs 50,000. Deficiency, if any, would be borne by A and B equally. Profit for the year ended 31st March 2025 was Rs 4,00,000.
Pass the necessary journal entries in the books of the firm.
Solution :-
WORKING NOTES:-
Distribution of profit
Profit sharing ratio = 5:4:1
Minimum guarantee of C = Rs 50,000
A’s share in profit = 4,00,000 x 5/10 = Rs 2,00,000
B’s share in profit = 4,00,000 x 4/10 = Rs 1,60,000
C’s share in profit = 4,00,000 x 1/10 = Rs 40,000
The deficiency in C’s share = (50,000 – 40,000) = Rs 10,000
A will bear = 10,000 x 1/2 = Rs 5,000
B will bear = 10,000 x 1/2 = Rs 5,000
Therefore,
Final profit share of A = 2,00,000 – 5,000 = Rs 1,95,000
Final profit share of B = 1,60,000 – 5,000 = Rs 1,55,000
Final profit share of C = 40,000 + 10,000 = Rs 50,000