Commerce Exam > Commerce Videos > Accountancy Class 12 > Guarantee of Profits in Partnerships
Guarantee of Profits in Partnerships Video Lecture | Accountancy Class 12 - Commerce
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FAQs on Guarantee of Profits in Partnerships Video Lecture - Accountancy Class 12 - Commerce
| 1. What is a guarantee of profits in a partnership? |  |
Ans.A guarantee of profits in a partnership refers to an agreement where one or more partners assure that a certain level of profits will be achieved during a specified period. This may involve clauses in the partnership agreement that outline how profits will be distributed and what happens if profits do not meet the guaranteed levels.
| 2. Are guarantees of profits legally enforceable in partnerships? | |
Ans.Legal enforceability of profit guarantees in partnerships depends on the terms outlined in the partnership agreement and local laws. Generally, if the agreement is clear and both parties consent to the terms, it can be enforceable. However, if profits are dependent on factors outside the partners' control, such as market conditions, enforceability may be limited.
| 3. How can partners determine the profit-sharing ratio in a partnership? | |
Ans.Partners can determine the profit-sharing ratio by discussing their contributions to the business, the level of involvement, and their respective investments. This ratio can be based on capital contributions, effort, or any mutually agreed-upon criteria that reflect each partner's role and input in the partnership.
| 4. What should be included in a partnership agreement regarding profit guarantees? | |
Ans.A partnership agreement regarding profit guarantees should include details such as the guaranteed profit amount, duration of the guarantee, conditions under which the guarantee applies, how profits will be calculated, and procedures for addressing shortfalls or disputes. Clear terms help prevent misunderstandings among partners.
| 5. What are the risks associated with profit guarantees in partnerships? | |
Ans.The risks associated with profit guarantees in partnerships include potential financial strain if profits do not meet expectations, disagreements among partners about performance, and the possibility of legal action if one partner fails to meet their obligations. Additionally, guarantees may lead to unrealistic business expectations and pressure on partners to achieve specific financial results.
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Nov 24, 2024 Last updated |
Video Description: Guarantee of Profits in Partnerships for Commerce 2024 is part of Accountancy Class 12 preparation.
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