Accountancy Part AAdmission of a Partner

In case of change in profit sharing ratio, which of the following acc…

In case of change in profit sharing ratio, which of the following account or statement is not usually prepared?

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Profit & Loss Account

A change in the profit sharing ratio among the existing partners is a reconstitution of the firm. It is handled in the same way as an admission: assets and liabilities are revalued, the partners' capital accounts are adjusted, and a new balance sheet is drawn up. The firm's Profit and Loss Account is prepared at the end of the year for the year's trading result; a change in ratio does not call for one.

Option (1) Revaluation Account — Prepared. It records the gain or loss on revaluing assets and liabilities, shared by the partners in the old ratio.

Option (3) Partner's Capital Account — Prepared. The revaluation result, reserves and goodwill adjustments are all posted to the partners' capital accounts.

Option (4) Balance Sheet — Prepared. A new balance sheet shows the revised values and capitals of the reconstituted firm.

NCERT (2026-27 edition):
Change in Profit Sharing Ratio among the Existing Partners – “… Any change, in the profit sharing ratio, like admission of partner, may also involve adjustments in respect of revaluation of assets and liabilities, transfer of accumulated profit and losses to partners' capital accounts in the old profit sharing ratio and adjustment of partners' capitals, if specified, so as to make them proportionate to the new profit sharing ratio. All this is done in the same way as in case of admission of a partner.”