Sameer and Manveer were partners in a firm sharing profits and losses in the ratio of 5:3. On 1st April, 2024, they admitted Sandeep as a new partner for 1/5th share in the profits with a guaranteed minimum amount of Rs 80,000. Sameer and Manveer continue to share profits as before but agreed to bear any deficiency on account of guarantee to Sandeep in the ratio of 3:5. The net profit of the firm for the year ended 31st March, 2025 was Rs 3,20,000.
Prepare Profit and Loss Appropriation Account of Sameer, Manveer and Sandeep for the year ended 31st March, 2025.
Sameer and Manveer were partners in a firm sharing profits and losses in the ratio of 5:3. On 1st April, 2024, they admitted Sandeep as a new partner for 1/5th share in the profits with a guaranteed minimum amount of Rs 80,000. Sameer and Manveer continue to share profits as before but agreed to bear any deficiency on account of guarantee to Sandeep in the ratio of 3:5. The net profit of the firm for the year ended 31st March, 2025 was Rs 3,20,000.
Prepare Profit and Loss Appropriation Account of Sameer, Manveer and Sandeep for the year ended 31st March, 2025.
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Solution and Explanation
Sandeep is admitted for 1/5 share with a guarantee that he gets at least Rs. 80,000.
If his 1/5 share of profit is less than Rs. 80,000, the shortfall is met by Sameer and Manveer in the ratio 3 : 5, as agreed.
Step 2: Find the share of each partner before the guarantee:
Net profit = Rs. 3,20,000. Sandeep share = 1/5 x 3,20,000 = Rs. 64,000.
Remaining profit = 3,20,000 - 64,000 = Rs. 2,56,000. It goes to Sameer and Manveer in their old ratio 5 : 3, since they continue to share as before.
Sameer = 2,56,000 x 5/8 = Rs. 1,60,000. Manveer = 2,56,000 x 3/8 = Rs. 96,000.
Step 3: Find the deficiency:
Guaranteed amount Rs. 80,000 is more than Rs. 64,000, so there is a deficiency.
Deficiency = 80,000 - 64,000 = Rs. 16,000.
Sameer bears 16,000 x 3/8 = Rs. 6,000. Manveer bears 16,000 x 5/8 = Rs. 10,000.
Step 4: Prepare the Profit and Loss Appropriation Account:
Sameer gets 1,60,000 - 6,000 = Rs. 1,54,000. Manveer gets 96,000 - 10,000 = Rs. 86,000. Sandeep gets 64,000 + 16,000 = Rs. 80,000.
Profit and Loss Appropriation Account for the year ended 31st March 2025
| Particulars | Amount (Rs.) | Particulars | Amount (Rs.) |
|---|---|---|---|
| To Profit transferred to: Sameer Capital A/c 1,60,000 less deficiency 6,000 Manveer Capital A/c 96,000 less deficiency 10,000 Sandeep Capital A/c 64,000 add deficiency 16,000 | 1,54,000 86,000 80,000 | By Profit and Loss A/c (Net Profit) | 3,20,000 |
| Total | 3,20,000 | Total | 3,20,000 |
Step 5: Check:
1,54,000 + 86,000 + 80,000 = Rs. 3,20,000, equal to the net profit. Sandeep gets exactly the guaranteed Rs. 80,000.
Final Answer:
Sameer gets Rs. 1,54,000, Manveer gets Rs. 86,000 and Sandeep gets Rs. 80,000.
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