What is the correct sequence of calculating the new profit-sharing ratio if the old profit-sharing ratio of partners and the new partner share is given?
a) Distribute remaining share between old partners in old ratio
b) Calculate the remaining share of the firm by deducting new partner share from 1
c) Assume the total share of the firm 1
Choose the correct answer from the options given below.
Answer & explanation
Correct answer: option 4
The correct answer is option 4- cba.
The correct sequence of calculating new profit-sharing ratio is
c) Assume the total share of the firm 1- Firstly, it is assumed that the total share of partnership firm is 1.
b) Calculate the remaining share of the firm by deducting new partner share from 1- New partner's share is deducted from the total share i.e. 1. Remaining share is belonged to old partners.
a) Distribute remaining share between old partners in old ratio- In the last, after deducting new partner share from the 1, the remaining share is distributed between partners in their old ratio.
** IF NOTHING IS MENTIONED IT IS ASSUMED THAT THE OLD PARTNERS SHARE REMAINING SHARE IN OLD RATIO.