Journal Entries:

1. To record the distribution of profits among partners:

Profit and Loss A/c 31,500
To Adil’s Capital A/c (4/7) 18,000
To Bilal’s Capital A/c (2/7) 9,000
To Ramiz’s Capital A/c (1/7) 4,500

2. To adjust Ramiz’s share of profit to the minimum guaranteed amount:

Ramiz’s Capital A/c 3,000
To Profit and Loss A/c 3,000

Loss Appropriation Account:

Particulars Amount
Net Profit for the year 31,500
Less: Ramiz’s share as per ratio (1/7) (4,500)
Adjusted profit 27,000
Add: Ramiz’s share to the minimum guaranteed amount 3,000
Adjusted profit after guarantee 30,000

Distribution of Profit:

Particulars Amount
Adil’s share of profit (4/7 of 30,000) 17,143
Bilal’s share of profit (2/7 of 30,000) 8,571
Ramiz’s share of profit (1/7 of 30,000) 4,286
Guaranteed amount to Ramiz 3,000
Total distribution of profit 33,000

Explanation:

The given question is about a partnership firm consisting of three partners Adil, Bilal, and Ramiz who share profits and losses in the ratio of 4:2:1 respectively. It is also given that Ramiz's share of profit will not be less than Rs. 7,500.

To distribute the profits among the partners, we need to first calculate the net profit of the firm for the year ended on 31st March 2020, which is Rs. 31,500. Then we need to allocate this profit to the partners in their respective ratios. Adil's share will be 4/7 of the profit, Bilal's share will be 2/7, and Ramiz's share will be 1/7.

However, the question also states that Ramiz's share of profit should not be less than Rs. 7,500. Therefore, we need to adjust his share of profit to the minimum guaranteed amount. We can do this by debiting Ramiz's Capital Account and crediting the Profit and Loss Account.

After adjusting Ramiz's share of profit, we can calculate the Adjusted Profit, which is Rs. 30,000. This is the amount that will be distributed among the partners.

To prepare the Loss Appropriation Account, we need to deduct Ramiz's share of profit from the net profit of the firm. We then add the adjusted amount of Ramiz's share to the minimum guaranteed amount. This gives us the Adjusted Profit after Guarantee, which is Rs. 30,000.

Finally, we can distribute the profit among the partners based on their profit sharing ratios. Adil's share is Rs. 17,143, Bilal's share is Rs. 8,571, and Ramiz's share is Rs. 4,286. We also need to add the guaranteed amount of Rs. 3,000 to Ramiz's share of profit, making the total distribution of profit Rs. 33,000.

In summary, the question required us to pass journal entries to distribute

Share of profit of Ramiz
higher of
minimum profit 7500
actual profit 31500*1*7=4500
Ramiz share 7500
journal
p/l appropriation a/c dr 31500
to ADILS CAPITAL A/C. 16000
TO BILALS CAPITAL A C. 8000
TO RAMIZS CAPITAL A C. 7500