Question

Vidhi, Manas and Ansh were partners sharing profits and losses in the ratio of 2 : 3 : 5. Ansh was given a guarantee that his share of profits in any given year would not be less than ₹ 1,20,000. Deficiency, if any, would be borne by Vidhi and Manas equally. Profits for the year ended 31st March, 2024 amounted to ₹ 2,00,000.
Pass necessary journal entries in the books of the firm for division of profits.

Hint:

Guaranteed profit must be fulfilled even if the actual profit share is less. The deficiency is adjusted by the responsible partners in agreed ratio.

Answer 1

Step 1: Profit = ₹ 2,00,000
Ratio = 2 : 3 : 5 → Total = 10 parts - Vidhi = \( \frac{2}{10} \times ₹ 2,00,000 = ₹ 40,000 \) - Manas = \( \frac{3}{10} \times ₹ 2,00,000 = ₹ 60,000 \) - Ansh = \( \frac{5}{10} \times ₹ 2,00,000 = ₹ 1,00,000 \) Step 2: Compare with Guarantee
Ansh was guaranteed ₹ 1,20,000
Actual share = ₹ 1,00,000 → Shortfall = ₹ 20,000 Step 3: Who bears the deficiency?
Vidhi and Manas equally → ₹ 10,000 each Step 4: Revised Shares:
- Vidhi = ₹ 40,000 – ₹ 10,000 = ₹ 30,000
- Manas = ₹ 60,000 – ₹ 10,000 = ₹ 50,000
- Ansh = ₹ 1,00,000 + ₹ 20,000 = ₹ 1,20,000 Step 5: Journal Entry \[ \begin{aligned} \text{Vidhi’s Capital A/c Dr.} & \hspace{5pt} ₹ 10,000
\text{Manas’s Capital A/c Dr.} & \hspace{5pt} ₹ 10,000
\text{To Ansh’s Capital A/c} & \hspace{5pt} ₹ 20,000
\end{aligned} \] Narration: Being adjustment of guaranteed profit to Ansh and deficiency borne by Vidhi and Manas equally.