Read the following passage and answer the questions.

A Solid Partnership

A, V and T were partners of a law firm sharing profits in the ratio of 5:3:2. Their partnership deed provided the following:

(i) Interest on partners' capital @ 5% p.a.

(ii) A guaranteed that he would earn a minimum annual fee of ₹6,00,000 for the firm.

(iii) T was guaranteed a profit of ₹2,50,000 (excluding interest on capital) and any deficiency on account of this was to be borne by A and V in the ratio of 2:3.

During the year ending March 31, 2019, A earned a fee of ₹3,20,000 and net profits earned by the firm were ₹8,60,000.
Partner's capital on April 01, 2018 were A - ₹3,00,000; V - ₹3,00,000 and T- ₹2,00,000.

What is the amount of profit to be credited to A's Capital account?

₹5,38,000

The correct answer is option 4- ₹5,38,000.

A guaranteed that he would earn a minimum annual fee of ₹6,00,000 for the firm. A earned a fee of ₹3,20,000.

A's deficiency = 6,00,000 - 3,20,000
                    = 2,80,000

This deficiency is brought by A i.e. 2,80,000. 

Net profits earned by the firm were ₹8,60,000.

PROFIT & LOSS APPROPRIATION ACCOUNT

*** Partner's capital on April 01, 2018 were A - ₹3,00,000; V - ₹3,00,000 and T- ₹2,00,000. Interest on partners' capital @ 5% p.a.
Interest on Capital:

A = 3,00,000 X 5/100
   = 15,000

V = 3,00,000 X 5/100
   = 15,000

T = 2,00,000 X 5/100
   = 10,000

*** Divisible profit = Net profit + Deficiency brought by A - Interest on capital
                        = 8,60,000 + 2,80,000 - 40,000
                        = 11,00,000

This is distributed between partners in their profit sharing ratio. A, V and T = 5:3:2.

A's share in profit  = 11,00,000 x 5/10
                           = 5,50,000

V's share in profit  = 11,00,000 x 3/10
                           = 3,30,000

T's share in profit  = 11,00,000 x 2/10
                           = 2,20,000

T was guaranteed a profit of ₹2,50,000 (excluding interest on capital) and any deficiency on account of this was to be borne by A and V in the ratio of 2:3. 

T's deficiency = 2,50,000 - 2,20,000
                     = 30,000

This 30,000 is borne by A and V in the ratio of 2:3. 
A's share in deficiency = 30,000 x 2/5
                                 = 12,000

V's share in deficiency = 30,000 x 3/5
                                 = 18,000

So, net divisible profit is as follows-

A = 5,50,000 - 12,000
    = 5,38,000

V = 3,30,000 - 18,000
   = 3,12,000

T = 2,50,000

So, amount credited for profit to A's capital account is ₹5,38,000.