Ram Rahim and Peter are sharing profit ratio of 1/2:1/3:1:6 the accoun...
Partnership Profit Sharing Ratio
- Ram Rahim and Peter share profit ratio of 1/2:1/3:1:6
Accounts Preparation
- Accounts of the firm are prepared every year on 31st March
Sales and Profits for the Year Ending 31st March 2018
- Sales: 500000 lakh
- Profits: 60000
Retirement of Ram Rahim
- Ram Rahim retires on 10th October 2018 due to permanent disability
- Sales till the date of retirement were 200000
Profit Calculation Basis
- Partnership agreement provides that profit in such cases be calculated on sales basis
Calculation of Ram's Share of Profit
- Total sales for the year: 500000 lakh
- Sales till Ram's retirement: 200000 lakh
- Sales after Ram's retirement: 300000 lakh
- Profit for the year: 60000
- Profit on sales basis: (60000/500000) x 100 = 12%
- Profit till Ram's retirement: 12% x 200000 = 24000
- Remaining profit after Ram's retirement: 60000 - 24000 = 36000
- Ram's profit share: (1/2 + 1/3) x 36000 = 18000
Explanation
- Ram Rahim and Peter share profit in the ratio of 1/2:1/3:1:6
- This means that out of the total profit, Ram gets 1/2, Peter gets 1/3, and the remaining 1/6 is shared by the other partners.
- The partnership agreement provides that profit in such cases be calculated on sales basis.
- Sales till the date of Ram's retirement were 200000 lakh, and sales after his retirement were 300000 lakh.
- The total profit for the year was 60000, which is 12% of the total sales.
- Ram's share of profit till his retirement is calculated by multiplying his profit share ratio (1/2 + 1/3) with the profit earned till his retirement (24000).
- The remaining profit after Ram's retirement is 36000, which is shared between the other partners according to their profit sharing ratio.
Ram Rahim and Peter are sharing profit ratio of 1/2:1/3:1:6 the accoun...
When we simplify the profit sharing ratio, then tne profit sharing ratio is 3:2:1. Sales and profit of the previous year are 500000 and 60000. So the rate of the profit will be 12% on sales. Sales of the described time period is 200000. So whole profit will be 24000 as the rate will be 12% on sales because we have to calculate profit on sales basics. When we'll distribute the profit of 24000 in the ratio of 3:2:1, then Ram's share of profit will be 12000.
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