X and Y were sharing profits in the ratio of 2 : 1. On 1st April, 2023 they admitted Z for 1/4th share in the profits. Z is guaranteed a minimum profit of ₹ 1,00,000 for the year

X and Y were sharing profits in the ratio of 2 : 1. On 1st April, 2023 they admitted Z for 1/4th share in the profits. Z is guaranteed a minimum profit of ₹ 1,00,000 for the year. Any deficiency in Z’s share is to be borne by X and Y in the ratio of 3 : 2. Losses for the year ending 31st March, 2024 amounted to ₹ 1,20,000. Record necessary entries.

Ans. (i) First of all, loss of ₹ 1,20,000 will be debited to X, Y and Z in their new profit sharing ratio of 2 : 1 : 1.

(ii) Thereafter, Z’s deficiency of ₹ 1,30,000 will be borne by X and Y in 3 : 2.]