“Sometimes a partner is admitted into the firm with a guarantee of a certain minimum amount by way of their share in the profits of the firm.” Identify which of the following is incorrect about such assurance.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → May not be granted to the new partner by all the old partners.
A new partner is sometimes promised a minimum amount as his share of profit. If his share under the profit sharing ratio falls short of it, the shortfall is made good by whoever gave the guarantee. The guarantee can come from all the old partners together, in a certain ratio, or from any one of them individually.
Option (1) May be allocated by the existing partners to the new partner in a predetermined ratio. — A true statement. The old partners can agree in advance the ratio in which they will bear any shortfall.
Option (2) May be given by any of the old partners individually to the new partner. — A true statement. One old partner alone can give the guarantee, and he alone then bears the deficiency.
Option (3) May be allocated to the new partner by all old partners according to old ratio. — A true statement. Sharing the shortfall in the old ratio is one way of agreeing such a ratio.
Option (4) says that all the old partners together may not give the guarantee. That is wrong, because a guarantee by all the old partners is one of the two recognised ways, so this is the statement that is incorrect.
NCERT (2026-27 edition): |