Page 117 - DEBKVOL-1

Chapter 5 Admission of a Partner 5.33
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4. Dr. CASH ACCOUNT Cr.
Particulars ` Particulars `
To Balance b/d 77,000 By Annu’s Capital A/c 41,080
To Sonu’s Capital A/c 56,000 By Mannu’s Capital A/c 85,720
To Premium for Goodwill A/c 21,000 By Balance c/d 27,200
1,54,000 1,54,000

Illustration 25 (Fundamentals and Admission: Guarantee to a New Partner).
X and Y are partners in a firm sharing profits in the ratio of 3 : 1. On 1st April, 2017, they
decide to admit Z for 1/5th share in profits with a guaranteed amount of ` 1,50,000 p.a. The new
profit-sharing ratio is agreed at 3 : 1 : 1. The firm earned a profit of ` 4,80,000 for the year
ended 31st March, 2018. X undertook to meet the liability arising out of the guaranteed
amount to Z. Calculate how the profits will be distributed and prepare Profit and Loss
Appropriation Account for the year ended 31st March, 2018.
Solution:
Particulars X Y Z
Divided Net Profit of ` 4,80,000 in the ratio of 3 : 1 : 1 ` 4,80,000 × 3/5 ` 4,80,000 × 1/5 ` 4,80,000 × 1/5
= ` 2,88,000 = ` 96,000 = ` 96,000
However, Z’s minimum guaranteed profit is ` 1,50,000. So, there is deficiency of ` 54,000,
to be borne by X personally.
X’s New Share of Profit = ` 2,88,000 – ` 54,000 = ` 2,34,000
Y’s Share of Profit = ` 96,000
Z’s New Share of Profit = ` 96,000 + ` 54,000 = ` 1,50,000.

Dr. PROFIT AND LOSS APPROPRIATION ACCOUNT for the year ended 31st March, 2018 Cr.
Particulars ` Particulars `
To Profit Transferred to: By Profit and Loss A/c 4,80,000
X’s Capital A/c 2,34,000 (Net Profit)
Y’s Capital A/c 96,000
Z’s Capital A/c 1,50,000
4,80,000 4,80,000

Illustration 26 (Fundamentals and Admission: Guarantee to a New Partner).
X and Y are partners, sharing profits and losses in the ratio of 2 : 1. On 1st April, 2017,
they admit Z with 1/4th share in profits with guaranteed profit of ` 25,000. Any deficiency
arising on that account shall be met by X and Y equally. Trading profits of the firm for the
year ended 31st March, 2018 amounted to ` 76,000. Show the distribution of profits.
Solution:
Step 1: Calculation of New Shares:
Let the Total Share be = 1, Z’s share = 1/4, Remaining Share = 1 – 1/4 = 3/4
X’s New Share = 2/3 × 3/4 = 2/4; Y’s New Share = 1/3 × 3/4 = 1/4; Z’s Share = 1/4.
So, New Ratio of X, Y and Z = 2 : 1 : 1.
Step 2: Z’s Share of Profit = ` 76,000 × 1/4 = ` 19,000.
Step 3: Deficiency = Guaranteed amount – ` 19,000
= ` 25,000 – ` 19,000 = ` 6,000.