In the case of guarantee of profit the Sequence of steps to be Followed are.

(A) divide the profit in the given ratio.

(B) prepare profit and loss appropriation account as usual.

(C) deduct the deficiency from the guaranteeing partner and add the same to guaranteed partner.

(D) find the deficiency.

Choose the correct answer from the options given below:

When a partner is guaranteed a minimum profit, the accounting treatment follows a specific logical sequence:

First (B): The Profit and Loss Appropriation Account is prepared as usual. This account shows the distributable profit after charging interest on capital, partner's salary, and other appropriations.

Second (A): The available profit is divided among all partners in their agreed profit-sharing ratio. This gives each partner their normal share based on the partnership deed.

Third (D): The deficiency is calculated. The guaranteed partner's actual share (calculated in step A) is compared with the guaranteed amount. If actual share < guaranteed amount, then:

Deficiency = Guaranteed Amount - Actual Share

Fourth (C): The adjustment is made. The deficiency amount is deducted from the guaranteeing partner's share and added to the guaranteed partner's share. This ensures the guaranteed partner receives at least the minimum promised amount.

For example, if Partner A is guaranteed ₹50,000 but his actual share comes to ₹35,000, the deficiency of ₹15,000 will be borne by the guaranteeing partner (as per agreement), and Partner A will ultimately receive ₹50,000.

Correct Answer: Option 3 - (B), (A), (D), (C)