Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Partnership

Question:

Read the following passage and answer the following question.

Arun, Varun and Tarun are partners in a firm. Their Capital Accounts stood at ₹8,00,000, ₹6,00,000 and ₹4,00,000 respectively on 1st April,2021. They shared profits and losses in the ratio of 3:2:1 respectively. Partners are entitled to interest on capital @ 6% per annum and salary to Varun and Tarun @ ₹4,000 per month and ₹6,000 per quarter respectively as per the provisions of the Partnership Deed. Varun's share of profit including interest on capital but excluding salary is guaranteed at a minimum of 80,000 p.a. Any deficiency arising on that account shall be met by Tarun. Profit for the year ended 31st March 2022 amounted to 2,70,000.

How much deficiency is borne by Tarun?

Options:

₹2,000

₹20,000

₹10,000

₹14,000

Correct Answer:

₹14,000

Explanation:

The correct answer is option 4- ₹14,000.

Profit of the firm = ₹2,70,000
Profit left after salary and interest on capital is 2,70,000 - 1,08,000 -72,000
                                                                     = 90,000
Profit sharing ratio is 3:2:1
Varun share is 2/6
Varun profit is = 90,000 x 2/6
                     = 90,000/3
                     = ₹30,000
But Varun is guaranteed profit of ₹80,000 which should include share of profit + interest on capital. So, he will get ₹80,000
HIS SHARE OF PROFIT IS 30000 AND INTEREST ON CAPITAL IS 36,000 SO TOTAL IS 30,000 + 36,000 = 66,000
Deficiency borne by Tarun = 80,000 - 66,000
                                         = ₹14,000