Change in profit sharing ratio, Financial Accounting

Change in profit sharing ratio

When there is a change in profit sharing ratio, it means that some of the partners will get higher profits based on the new ratios in the future while others will loose or will get lower profits.

Those who will get higher  profits therefore need to pay for the higher profits whereas those who will get lower profits thus need to be compensated for the reduction in their profit share.

To achieve this objective, goodwill is normally introduced in the accounts by crediting the partners capital accounts according to their old profit sharing ratio (PSR) and written off again by debiting the partners capital accounts according to their new PSR.

Posted Date: 12/11/2012 6:05:19 AM | Location : United States







Related Discussions:- Change in profit sharing ratio, Assignment Help, Ask Question on Change in profit sharing ratio, Get Answer, Expert's Help, Change in profit sharing ratio Discussions

Write discussion on Change in profit sharing ratio
Your posts are moderated
Related Questions
Variation of securities It would seem logical to carry out a strict apportionment between income and capital every time investments are bought or sold. If this were done, it wo

Contribution and indemnity Generally the trustees are jointly and severally liable to the beneficiaries and a trustee sued may claim contribution from the others where although

You have been provided with the following information on a fixed-fixed USD-GBP currency swap, the spot exchange rate between USD and GBP, and the USD and GBP yield curves: Fi

CHARACTERISTICS OF PARTNERSHIP

Q. Redemption of debt? Equity finance is permanent capital that doesn't need to be redeemed while debt finance will need to be redeemed at some future date. Redeeming a huge am

Annulment of order The order may be annulled if In the opinion of the court the debtor ought not to have been adjudicated bankrupt; All the debts have been paid in fu

Staples INC has operating leases. Assuming a discount rate of 9%, adjust the current balance sheet for the presences of these leases. Which reported expenses would change if these


#questBackground: The SEC set up the Work Plan which sets forth specific areas and factors to consider before potentially transitioning our current financial reporting system for U

State the role of Accounting information Accounting information has a significant role to play in reporting the extent to which different groups have benefited from the busines