In a partnership, how to deal with Guaranteed share of profit

February 10th, 2011 Comments off
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When the amount of a partner’s share of profit is guaranteed by the other partners and when his or her actual share of profit amounts to LESS than the amount guaranteed, we should:

Step 1:

Debit:  Appropriation account with the guaranteed amount

Credit: Partner’s Current Account

Step 2:

Any remaining profits will then be shared among the other partners in the ratios in which they share profits and losses as among themselves.

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