Explanation:

When a partner gives a guarantee to another partner, it means that they are assuring the other partner that in case of any losses or liabilities incurred by the partnership firm, they will be personally responsible for covering those losses. This guarantee is usually given by a partner with a stronger financial position or a higher creditworthiness.

Loss on such guarantee:

If the partnership firm incurs a loss and the partner who gave the guarantee is required to cover it, the loss will be borne by that partner personally. This means that they will have to use their personal funds or assets to compensate for the loss.

Reason:

The reason why the loss on the guarantee is borne by the partner who gave the guarantee is because they willingly took on the responsibility of covering any losses or liabilities incurred by the partnership firm. This guarantee is a personal commitment made by the partner, and it is separate from the profit sharing arrangement within the partnership.

Impact on the partnership:

Since the loss on the guarantee is borne by the partner who gave it, the other partners and the partnership firm as a whole are not directly affected by this loss. The guarantee does not impact the profit sharing arrangement or the distribution of profits among the partners.

Partner with highest profit sharing ratio:

The guarantee given by a partner does not depend on their profit sharing ratio within the partnership. It is based on their personal financial standing and creditworthiness. Therefore, the partner who gave the guarantee may or may not have the highest profit sharing ratio. The guarantee is a separate commitment made by the partner, and it does not affect the distribution of profits among the partners.

In conclusion, when a partner gives a guarantee to another partner in a partnership firm, the loss on such guarantee will be borne by the partner who gave the guarantee. This is because the guarantee is a personal commitment made by the partner and it does not impact the other partners or the partnership firm as a whole. The guarantee is separate from the profit sharing arrangement within the partnership and is based on the personal financial standing of the partner rather than their profit sharing ratio.