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.
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Capital account
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|
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A
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B
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C
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A
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B
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C
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Goodwill
|
75,000
|
50,000
|
25,000
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Bal. b/d
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400,000
|
300,000
|
200,000
|
|
Bal. c/d
|
375,000
|
300,000
|
225,000
|
Goodwill
|
50,000
|
50,000
|
50,000
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|
|
450,000
|
350,000
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250,000
|
|
450,000
|
350,000
|
250,000
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