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2. Three Chartered Accountants A,B and C entered into a partnership subject to the following terms:
(a) That the profit sharing ratio among A,B and C will be 3:2:1 respectively.
(b) That the gross fees earned by A,B and C shall be equal to their average gross fees of the preceding 3 years when they were carrying on the profession individually.
(c) That C’s share of profit shall not be less than Rs.30,000 p.a.
Other information:
The net profits for the first year is Rs.1,50,000.
Average gross fees of the preceding 3 years: A---Rs.1,20,000; B---Rs.50,000; C-Rs.30,000.
Actual gross fees earned during the year: : A---Rs.1,26,000; B---Rs.32,000; C-Rs.30,000.
You are required to prepare the Profit and Loss Appropriation Account
Replies (1)
As share of fee = Total Fee x As' share of ratio / Total ratio of partners = 1,88,000 x 3 / 6 - 94,000
Bs share of fee = Total fee xBs' share of ratio / Total ratio of partners = 1,88,000 x 2 /6 = 62,667
Cs Share of fee = Total fee x Cs' share of ratio / Total ratio of partners = 1,88,000 x 1 / 6 = 31,333
Debit Profit & Loss Appropriation a/c with Rs.1,88,000
Credit with individual share amounts to the partnership profit & loss appropriation accounts (as per above calculations)
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