Question

Abhay, Boris and Chetan were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Boris was guaranteed profit of ₹ 95,000. Any deficiency on account of this was to be borne by Abhay and Chetan equally. The firm earned a profit of ₹ 2,00,000 for the year ended 31st March, 2023. The amount given by Abhay to Boris as guaranteed amount will be:

• A. ₹ 17,500.
• B. ₹ 35,000.
• C. ₹ 25,000.
• D. ₹ 10,000.

Hint:

When solving guarantee questions always calculate the actual share first. The guarantee only "kicks in" if the actual share is lower than the promised amount.

Answer 1

The Correct Option is A

Concept: Guarantee of profit is an assurance given to a partner that they will receive a minimum amount of profit. If their actual share is less than this minimum, the "deficiency" is covered by the guaranteeing partners in an agreed ratio.

Step 1: Calculate Boris's actual share of the firm's profit.
• Total Profit = ₹ 2,00,000.
• Profit Sharing Ratio (Abhay : Boris : Chetan) = 5 : 3 : 2.
• Boris's share = $2,00,000 \times \frac{3}{10} = ₹ 60,000$.

Step 2: Calculate the total deficiency.
• Guaranteed Profit to Boris = ₹ 95,000.
• Actual Share = ₹ 60,000.
• Deficiency = ₹ 95,000 - ₹ 60,000 = ₹ 35,000.

Step 3: Determine the amount borne by Abhay.
• The deficiency is borne by Abhay and Chetan equally (1 : 1).
• Amount given by Abhay = $35,000 \times \frac{1}{2} = ₹ 17,500$.