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

What do you mean by fiscal year, Q. What do you mean by Fiscal Year? Fi...

Q. What do you mean by Fiscal Year? Fiscal Year - Period of 12 consecutive months chosen by an entity as its ACCOUNTING period that may or may not be a calendar year. Fixed Ass

Rate of return on assets, EVERLIGHT COMPANY LIMITED Comparative Balan...

EVERLIGHT COMPANY LIMITED Comparative Balance Sheet December 31, Year 1 and Year 2     Year 1       Year2

Explain a reduction in expected inflation - prices and wages, Assume that p...

Assume that prices and wages adjust rapidly so that the markets for labor, goods, and assets are always in equilibrium. What are the effects of each of the following on real money

Illustration of pension funds, Normal 0 false false false ...

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4

Student, Open "Hoyle CPA: Earnings Per Share." Under "Free Questions" selec...

Open "Hoyle CPA: Earnings Per Share." Under "Free Questions" select "Financial Accounting & Reporting."

Bankruptcy accounts for individuals and partnerships, BANKRUPTCY ACCOUNTS F...

BANKRUPTCY ACCOUNTS FOR INDIVIDUALS AND PARTNERSHIPS These include a statement of affairs and deficiency account. A statement of affairs takes the following form: v\:*

Net investment and single net cash flow, Would you invest in a project that...

Would you invest in a project that has a net investment of $14,600 and a single net cash flow of $24,900 in 5 years, if your required rate of return was 12 percent?

[email protected], Question 01: (1.1 and 1.3) What is accounting and how...

Question 01: (1.1 and 1.3) What is accounting and how is accounting environment? Question 02: (1.2 and 1.4) Presenting the characteristics of the quality of accounting information

rate of interest and discount rate, This is partly taken from a court case...

This is partly taken from a court case where one of my colleagues was a witness. Suppose that an employee is terminated without cause and that she sues the company for compensation

Illustrate individuals budget constraint, An individual is currently workin...

An individual is currently working 40 hours per week, earning $10 per hour.  He loses his job and successfully applies for unemployment insurance.  The insurance plan works as foll

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