Study Material & Notes for the Chapter 3
Partnership - Change in Profit Sharing Ratio
V. ADJUSTMENT OF CAPITAL
Applicable when Partners decide that the capitals shall be in their profit-sharing ratio
STEPS
- Compute the new profit-sharing ratio
- Compute partners’ existing capital post adjustment of Revaluation, Reserves Accumulated losses & Goodwill etc.
- Determine firm total capital which is the sum-total of existing capital of all the partners
- Compute the New Capital of each partner by multiplying Total Capital with his new share
- Compare the new capital with existing capital and any shortfall to be brought in and excess is refunded