Question

Emily, Farida and Gauri were partners in a firm sharing profits and losses in the ratio of 4:3:1. Farida was guaranteed Rs 35,000 as her share in the profits in the firm. Any deficiency arising on that account was to be met by Emily. The firm earned a profit of Rs 80,000 for the year ended 31st March 2024. The profit credited to Farida's capital account was:

• A. Rs 30,000
• B. Rs 35,000
• C. Rs 25,000
• D. Rs 5,000

Hint:

In guarantee of profit, first calculate the partner's profit share according to the ratio. If this share is less than the guaranteed amount, the partner receives the guaranteed amount. The difference (deficiency) is borne by the guaranteeing partner(s) as per the agreement.

Answer 1

The Correct Option is B

The profit-sharing ratio of Emily, Farida, and Gauri is 4:3:1. Total profit for the year = Rs 80,000. Farida's share of profit based on the ratio = \( \frac{3}{4+3+1} \times 80,000 \) \[ \text{Farida's share} = \frac{3}{8} \times 80,000 = Rs 30,000 \] Farida is guaranteed a minimum profit of Rs 35,000. The calculated share (Rs 30,000) is less than the guaranteed amount (Rs 35,000). Deficiency = Guaranteed Amount - Calculated Share \[ \text{Deficiency} = 35,000 - 30,000 = Rs 5,000 \] This deficiency is to be met by Emily. The amount credited to Farida's Capital Account will be her guaranteed minimum profit. Profit credited to Farida = Rs 35,000.
(Emily's share would be \( \frac{4}{8} \times 80,000 = 40,000 \), less the deficiency of \( 5,000 \), so Emily gets \( 35,000 \). Gauri's share is \( \frac{1}{8} \times 80,000 = 10,000 \). Total = 35,000 + 35,000 + 10,000 = 80,000).