Guarantee is an assurance given to the partner of the firm that at least a fixed amount shall be given to him/her irrespective of his/her actual share in profits of the firm. If actual share in profits is less than the guaranteed amount in that case the deficit amount shall be borne either by the firm or by any partner as the case may be.

Note: Guarantee to a partner is given for minimum share in profits. If the actual share in profits is more than the minimum guaranteed amount then the actual profits will be allowed to the partner.

Case: 1. When guarantee is given by FIRM (i.e., by all the Partners of the firm):

Guaranteed amount to a partner is written in Profit and Loss Appropriation A/c

Remaining profits are distributed among the remaining partners in their remaining ratio.

Case 2: When guarantee is given by a partner or partners to another partner:

Calculate the share in profits for the partner to whom guarantee is given

If share in profits is more than the guaranteed amount, distribute the profits as per the profit and loss sharing ratio in usual manner.

If share in profits is less than the guaranteed amount, find the difference between the share in profits and the guaranteed amount and the difference is known as Deficiency. Deficiency is distributed among the partner or partners who guaranteed in a certain ratio and subtracted from his or their respective shares.

Guarantee of Profit to a Partner in a Partnership refers to an agreement between the partners that ensures a minimum amount of profit to a particular partner in a given accounting period, irrespective of the actual profit earned by the firm during that period.

This guarantee is offered to a partner to assure them of a reasonable return on their investment in the partnership. Some partners may be more passive or provide support to the firm in a non-operational capacity, making it difficult for them to earn a substantial profit share. In such cases, the guarantee of profit can be an incentive for them to continue their association with the partnership.

Details of Guarantee of Profit to a Partner
The following are some of the details that are important to consider while implementing a guarantee of profit to a partner in a partnership:

1. Conditions: The guarantee of profit to a partner should be subject to certain conditions, such as the partner's active participation in the firm's operations or meeting certain performance targets.

2. Calculation: The amount of guaranteed profit should be calculated based on a predetermined formula or percentage of the partner's capital contribution to the firm.

3. Sharing of Actual Profit: The guaranteed profit should be paid out to the partner, even if the firm's actual profit is lower than the guaranteed amount. However, if the actual profit is higher than the guaranteed amount, the partner should receive their share of profits in proportion to their profit-sharing ratio.

4. Duration: The duration of the guaranteed profit should be specified in the partnership agreement. It can be for a specific period or until the partner's capital contribution is recovered.

5. Accounting Treatment: The guaranteed profit should be recorded as an expense in the partnership's profit and loss account and debited to the partner's capital account.

Conclusion
Guarantee of profit to a partner is an arrangement that can benefit both the partner and the partnership. It can provide a sense of security to a partner who may not have a significant operational role in the firm and can motivate them to continue their association with the partnership. However, it is important to specify the terms and conditions of the guarantee and ensure that it does not adversely affect the firm's financial position.