Accountancy Part AAccounting for Partnership

The minimum guaranteed amount shall be paid to the new partner when h…

The minimum guaranteed amount shall be paid to the new partner when his share of profit as per the profit sharing ratio:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Is less than the guaranteed amount

A guarantee of minimum profit promises a new partner that his share will not fall below a fixed amount. The guarantee comes into play only when his share as per the profit sharing ratio is less than the guaranteed amount; the shortfall is borne by the partners who gave the guarantee. If his share is equal to or more than the guaranteed amount, he takes his own share and the guarantee is not used.

NCERT (2026-27 edition):
Guarantee of Profit to a Partner – “… The minimum guaranteed amount shall be paid to such new partner when his share of profit as per the profit sharing ratio is less than the guarnteed amount.”