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
Baseball Products manufactures a single product with the following full unit costs at a volume of 2,000 units: Direct materials $ 900 Direct labor 360 Manufacturing overhead* 6

How to determine the depreciation To determine depreciation in straight-line method, take cost of the asset, less the trade-in value, and divide by the estimated years of usefu

define law including contract and bankruptcy

Discuss the applicability of the operating cycle in poultry (consider broilers)

VK Ltd a multi-product Company, furnishes you the following data relating to the year 2000. First Half of the year Second Half of the year Sales Rs. 4

Ademption If property which has been specifically bequeathed does not belong to the testator at the time of his death, or has been converted into property of a different kind,

CAUSES OF FAILURE OF LEGACIES AND GIFTS OF RESIDUE 1) Ademption : If property which has been specifically bequeathed does not belong to the testator at the time of his death,

Assume that it is now January 1, 2012. XYZ Inc. has developed a solar panel capable of generating 200% more electricity than any other solar panel currently on the market. As a res

Disclaimer of leases In principle where the bankrupt is a lessee the lease cannot be disclaimed without leave of the court; but such leave is not required in the following case

Question A The key functions of financial system are to provide a link between savers and investors. What are the key functions of financial market Question B Describe the me