A, B, and C are partners sharing profits in the ratio of 5:4:1. C is given a guarantee that his share in a year will not be less than ₹ 5,000. Profit for the year ended 31st March 2021 is ₹ 40000. Deficiency in the guaranteed profit of C is to be borne by B. How much deficiency is borne by B?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Deficiency of C ₹1,000 met by B.
Profit for the year = ₹40,000
Profit sharing ratio = 5 : 4 : 1
C's share in profit = 40,000 x 1/10
= ₹4,000
C is given a guarantee of minimum profit of ₹5,000
Deficiency in C’s share = 5,000 − 4,000
= ₹1,000
This deficiency of C is borne by B.