Question

Chaman, Burman, and Aman were partners in a firm sharing profits and losses in the ratio of 3:2:1. Aman was guaranteed a minimum amount of ₹60,000 as his share of profit every year. The net profit for the year ended 31\textsuperscript{st March, 2023 amounted to ₹1,20,000. Pass necessary journal entries in the books of the firm showing the distribution of profit amongst the partners.}

Hint:

When a partner has a guaranteed profit, the adjustment is made from the remaining partners in their profit-sharing ratio.

Answer 1

Step 1: Distribution of Net Profit in the Profit-Sharing Ratio. The net profit of ₹1,20,000 is distributed among Chaman, Burman, and Aman in the ratio of 3:2:1: \[ \text{Chaman's Share} = ₹1,20,000 \times \frac{3}{6} = ₹60,000 \] \[ \text{Burman's Share} = ₹1,20,000 \times \frac{2}{6} = ₹40,000 \] \[ \text{Aman's Share} = ₹1,20,000 \times \frac{1}{6} = ₹20,000 \] Step 2: Adjustment for Aman's Guaranteed Profit. Aman is guaranteed ₹60,000, but his calculated share is only ₹20,000. Hence, an adjustment of ₹40,000 needs to be made from the profits of Chaman and Burman in their profit-sharing ratio (3:2): \[ \text{Adjustment from Chaman} = ₹40,000 \times \frac{3}{5} = ₹24,000 \] \[ \text{Adjustment from Burman} = ₹40,000 \times \frac{2}{5} = ₹16,000 \] Step 3: Final Distribution of Profit. After adjustments: \[ \text{Chaman's Final Share} = ₹60,000 - ₹24,000 = ₹36,000 \] \[ \text{Burman's Final Share} = ₹40,000 - ₹16,000 = ₹24,000 \] \[ \text{Aman's Final Share} = ₹20,000 + ₹40,000 = ₹60,000 \] Step 4: Journal Entries: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Dr.} & \textbf{Amount (₹)} & \textbf{Cr.} & \textbf{Amount (₹)} \\ \hline \text{Profit and Loss A/c Dr.} & 1,20,000 & \text{Chaman's Capital A/c} & 36,000 \\ & & \text{Burman's Capital A/c} & 24,000 \\ & & \text{Aman's Capital A/c} & 60,000 \\ & \text{(Being the distribution of net profit adjusted for guaranteed profit to Aman)} & & \\ \hline \text{Chaman's Capital A/c Dr.} & 24,000 & \text{Burman's Capital A/c Dr.} & 16,000 \\ & & \text{To Aman's Capital A/c} & 40,000 \\ & \text{(Being the adjustment of guaranteed profit to Aman)} & & \\ \hline \end{array} \]

Answer 2

Given: 
Profit sharing ratio = 3 : 2 : 1 
Aman's guaranteed minimum profit = ₹60,000 
Net Profit for the year = ₹1,20,000 

Step 1: Calculate normal share of profit:
Total ratio = 3 + 2 + 1 = 6 
Chaman's share = ₹1,20,000 × (3/6) = ₹60,000 
Burman's share = ₹1,20,000 × (2/6) = ₹40,000 
Aman's share = ₹1,20,000 × (1/6) = ₹20,000 

Step 2: Check Aman’s guarantee:
Aman is guaranteed ₹60,000 but he has got only ₹20,000.
Deficiency = ₹60,000 − ₹20,000 = ₹40,000.

Step 3: Deficiency borne by Chaman and Burman in their profit-sharing ratio (3:2):
Chaman’s share of deficiency = ₹40,000 × (3/5) = ₹24,000 
Burman’s share of deficiency = ₹40,000 × (2/5) = ₹16,000 

Step 4: Adjusted profit distribution:
Chaman = ₹60,000 − ₹24,000 = ₹36,000 
Burman = ₹40,000 − ₹16,000 = ₹24,000 
Aman = ₹20,000 + ₹40,000 = ₹60,000 

Step 5: Journal Entries:

 

Date	Particulars	Debit (₹)	Credit (₹)
31-Mar-2023	Profit and Loss A/c Dr.     To Chaman’s Capital A/c     To Burman’s Capital A/c     To Aman’s Capital A/c (Being net profit transferred to partners’ capital accounts in their profit-sharing ratio)	1,20,000	Chaman: 60,000 Burman: 40,000 Aman: 20,000
31-Mar-2023	Chaman’s Capital A/c Dr. 24,000 Burman’s Capital A/c Dr. 16,000     To Aman’s Capital A/c 40,000 (Being deficiency in Aman’s guaranteed profit borne by Chaman and Burman in 3:2 ratio)	40,000	40,000

Final Profit Distribution:
Chaman: ₹36,000
Burman: ₹24,000
Aman: ₹60,000