A guaranteed minimum profit to B. Bs deficiency is Rs 9000. What will be the effect on A in final distribution?

Correct answer: As profit will decrease by Rs 9000

A minimum-profit guarantee promises that B will receive at least the guaranteed amount. If B’s actual share is lower by Rs 9,000, the difference is called a deficiency. The partner who gave the guarantee, A, must bear this deficiency unless the agreement specifies another arrangement. This means A’s share of profit is reduced by Rs 9,000 so that B can receive the promised minimum amount.

Consequently, option A is correct: A’s profit decreases by Rs 9,000. The amount is not a reduction in B’s drawings, because drawings are withdrawals and are separate from the guaranteed profit. It also does not increase sales or change the firm’s operating activity. The adjustment is made only in the final distribution of profit, transferring the deficiency from the guaranteed partner’s share to the guarantor’s share.