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The deed gives a minimum profit guarantee. If the actual share is more than the guarantee what will the partner receive?

Answer and explanation

Correct answer: The actual higher share

The governing concept is the meaning of a minimum profit guarantee in a partnership agreement. The word “minimum” establishes a floor, not a ceiling. The partner is protected from receiving less than the guaranteed amount, but the guarantee does not replace the partner’s normal entitlement when the actual share calculated under the agreed ratio is higher. For example, if the guarantee is 50,000 and the actual profit share is 65,000, the partner receives 65,000, not 50,000 plus 65,000. Hence option B is correct. Option A would wrongly treat the guarantee as a maximum, option C would duplicate the same entitlement, and option D ignores both the actual share and the contractual protection.

Related tags

Minimum Profit GuaranteeProfit SharingPartnership DeedPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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