Adjusting Capital Accounts
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Questions and Answers

Why are assets revalued and liabilities reassessed in case of a change in profit-sharing ratio or reconstitution of the firm?

  • To determine the new profit-sharing ratio
  • To distribute accumulated profit and loss
  • To calculate the sacrificing and gaining share of each partner
  • To determine the new capital of the partners (correct)

    • Which account is debited to write off goodwill in case of a change in profit-sharing ratio or reconstitution of the firm?

  • Partner's capital account in the new profit-sharing ratio
  • Goodwill account
  • Partner's capital account in the old profit-sharing ratio (correct)
  • Accumulated profit and loss account

    • What happens to accumulated profit and loss when there is a change in the profit-sharing ratio or reconstitution of the firm?

  • It is distributed among the partners in the new profit-sharing ratio
  • It is distributed among the partners in the old profit-sharing ratio (correct)
  • It is carried forward to the next accounting period
  • It is written off

    • How is the difference between the new profit-sharing ratio and the old profit-sharing ratio calculated?

    <p>By calculating the sacrificing and gaining share of each partner</p> Signup and view all the answers

    What happens to goodwill in case of a change in profit-sharing ratio or reconstitution of the firm?

    <p>It is written off</p> Signup and view all the answers

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