Any change in the profit sharing ratio among existing partners may not involve adjustments in respect of:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Realisation of assets and discharge of liabilities
A change in the profit sharing ratio among the existing partners brings no new partner in and takes none out; the firm carries on. Like an admission, it may need the revaluation of assets and liabilities, the transfer of accumulated profits and losses in the old ratio and an adjustment of capitals, but nothing is sold off and no liability is paid off.
Option (1) Revaluation of assets and liabilities — An adjustment on a change in ratio. The gain or loss on revaluation belongs to the partners in the old ratio, so it is worked out before the new ratio applies.
Option (2) Transfer of accumulated profit and losses to partners’ capital accounts in the old profit sharing ratio — An adjustment on a change in ratio. Reserves and past losses were earned or suffered under the old ratio, so they are shared in it.
Option (4) Adjustment of partners’ capitals, if specified, so as to make them proportionate to the new profit sharing ratio — An adjustment on a change in ratio. Where the partners so agree, capitals are brought into line with the new ratio.
Realisation of assets and discharge of liabilities happens only on the dissolution of a firm, when the business comes to an end, which is why it is the one item that does not arise here.
NCERT (2026-27 edition): |