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Illustration of change in profit sharing ratio
A, B and C have been trading as equal partners having capital contributions of £400,000, £300,000 and £200,000 respectively. They deaded to change their profit sharing ratio to 3:2:1. Goodwill was agreed at £150,000.Required:Prepare their capital accounts to show their new capital balances assuming that goodwill in not to be retained in the accounts.
Capital account
B
C
Goodwill
75,000
50,000
25,000
Bal. b/d
400,000
300,000
200,000
Bal. c/d
375,000
225,000
450,000
350,000
250,000
#Which of the two ratios are the greatest? 1.67.1 or 0.29.1
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