State the ratio in which the partners share accumulated profits when there is a change in the profit sharing ratio among existing partners.
State the ratio in which the partners share accumulated profits when there is a change in the profit sharing ratio among existing partners.
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In case of a change in the profit-sharing ratio, the accumulated profits can be distributed in two cases.
Case – 1
When accumulated profits are not to be shown in the new Balance Sheet.
In this case, Accumulated profit is distributed among partners in their old profit-sharing ratio.
Case – 2
When the accumulated profit is to be shown in the new Balance Sheet.
In this case, adjusting entry is passed as follows
Gaining partner’s Capital A/c Dr.
To Sacrificing partner’s Capital A/c
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