Q.A, B and C are partners sharing profits in the ratio 5:3:2. The partnership deed provides that C's share of profit shall not be less than ₹40,000 in any year, and any deficiency arising on this account shall be borne by A and B in their profit-sharing ratio. The net profit for the year ended 31st March 2024, to be distributed as per the ratio, was ₹1,80,000. Show the distribution of profit among the partners.

Applying the normal 5:3:2 ratio would give C less than what the deed has guaranteed him, so the shortfall must first be identified and then made good out of A and B's own shares, in their own profit-sharing ratio.

Step 1: Compute each partner's share as per the normal 5:3:2 ratio

A = ₹1,80,000 × 5/10 = ₹90,000

B = ₹1,80,000 × 3/10 = ₹54,000

C = ₹1,80,000 × 2/10 = ₹36,000

Step 2: Identify the deficiency in C's guaranteed share

Guaranteed minimum to C = ₹40,000. Normal share as above = ₹36,000. Deficiency = ₹40,000 − ₹36,000 = ₹4,000.

Step 3: Apportion the deficiency between A and B in their own ratio (5:3)

A bears = ₹4,000 × 5/8 = ₹2,500

B bears = ₹4,000 × 3/8 = ₹1,500

Step 4: Final distribution

A faster alternative: set aside C's guaranteed ₹40,000 first, leaving ₹1,80,000 − ₹40,000 = ₹1,40,000 to be shared between A and B alone, in their own ratio of 5:3. A = ₹1,40,000 × 5/8 = ₹87,500; B = ₹1,40,000 × 3/8 = ₹ …

A common mistake is dividing the ₹4,000 deficiency between A and B in the original three-partner ratio (5:3:2) instead of only between the two partners actually bearing it, in their own ratio (5:3) — C, …