Question

Amit and Babu are partners in the ratio of 3 : 2. They admit Charu for \( \frac{1}{6} \) share. Interest on capital @ 6% p.a. Amit guarantees that Charu's profit after interest on capital will not be less than Rs. 30,000. Capitals: Amit Rs. 2,50,000, Babu Rs. 2,00,000, Charu Rs. 1,50,000. Profit before interest on capital Rs. 1,50,000. Prepare Profit and Loss Appropriation Account (New Ratio 3 : 2 : 1).

Answer 1

Interest on capital \(@\) 6%: Amit 15,000; Babu 12,000; Charu 9,000. Profit before interest is 1,50,000, so profit after interest becomes: 1,50,000 − 36,000 = 1,14,000. Charu must receive at least 30,000; her normal share in new ratio 3 : 2 : 1 is 1,14,000 \(\times\) \( \frac{1}{6} \) = 19,000. Guarantee shortfall = 30,000 − 19,000 = 11,000, which Amit must bear. Hence Amit's share is reduced by 11,000 and added to Charu. Final distribution: Amit 57,000 − 11,000 = 46,000; Babu 38,000; Charu 30,000. 
Profit & Loss Appropriation Account 
\[ \begin{array}{|l|r|l|r|} \hline \text{Dr.} & \text{Amount (Rs.)} & \text{Cr.} & \text{Amount (Rs.)} \\ \hline \text{To Interest on Capital:} & & \text{By Profit before IOC} & 1,50,000  \\ \text{Amit} & 15,000 & & \\ \text{Babu} & 12,000 & & \\ \text{Charu} & 9,000 & & \\ \text{To Profit transferred to:} & & & \\ \text{Amit} & 46,000 & & \\ \text{Babu} & 38,000 & & \\ \text{Charu (Guaranteed)} & 30,000 & & \\ \hline \text{Total} & 1,50,000 &  \text{Total} & 1,50,000 \\ \hline \end{array} \]