In the adjustment of the continuing partner's capital, when the capital of the new firm is specified by the partners, the total capital of the firm is divided among the remaining partners based on the new profit-sharing ratio. How the excess or deficiency of capital in the individual capital accounts is adjusted?

Adjusting the capital contributions in cash

In the adjustment of the continuing partner's capitals, when the capital of the new firm is specified by the partners, the excess or deficiency of capital in the individual capital accounts is adjusted by adjusting the capital contributions in cash. This means that if there is an excess of capital, the partner can withdraw the excess amount in cash, reducing their capital contribution. On the other hand, if there is a deficiency of capital, the partner will be required to contribute additional cash to make up for the shortfall, increasing their capital contribution.