Change in profit sharing ratio, Financial Accounting

Assignment Help:

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.


Related Discussions:- Change in profit sharing ratio

Default risk premium , A Treasury bond that matures in 10 years has a yield...

A Treasury bond that matures in 10 years has a yield of 3%. A 10-year corporate bond has a yield of 9%. Suppose that the liquidity premium on the corporate bond is 0.8%. What is th

Compute the net income(loss), information for the year ended December 31, 2...

information for the year ended December 31, 2010: Sales 110,000 Direct materials used 20,800 Indirect production costs-fixed 10,400 Indirect production costs-variable 6,600 Direct

Resulting trusts-trusts laws and accounts, Resulting trusts Resulting t...

Resulting trusts Resulting trusts occur where equity regards the property which is held by a trustee as belonging in equity to the person who transferred it to, or caused it to

Explain about credit-worthiness, Q. Explain about Credit-worthiness? Th...

Q. Explain about Credit-worthiness? There are a numerous ways in which Fenton Security plc could ensure that customers are subjected to tighter credit appraisal checks before g

Auditngrol ., what type of control procedures were ignored at daiwa

what type of control procedures were ignored at daiwa

What is profitability ratios, Profitability Ratios - These ratios include...

Profitability Ratios - These ratios include the Gross profit Margin, Net profit Margin, Operating Margin, Return on Equity (ROE), and Return on Total Assets. These ratios helps t

Percent Gain, Assume you invest $150 per month in a stock. Stock prices are...

Assume you invest $150 per month in a stock. Stock prices are as follows: January $10.50, February $9.75, March $9.50, April $11.00, May $10.75, June $9.75, July $9.00, August $8.5

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd