Podcast
Questions and Answers
What happens to the profit sharing ratio in a partnership when there is a change in profit sharing ratio?
What happens to the profit sharing ratio in a partnership when there is a change in profit sharing ratio?
How is goodwill typically treated in a partnership when there is a change in profit sharing ratio?
How is goodwill typically treated in a partnership when there is a change in profit sharing ratio?
What happens to the share of a retiring partner in a partnership?
What happens to the share of a retiring partner in a partnership?
Study Notes
Changes in Profit Sharing Ratio in a Partnership
- When there is a change in profit sharing ratio, the existing partners' capital accounts are adjusted to reflect the new profit sharing ratio.
- The profit sharing ratio change affects the distribution of profits and losses among the partners.
Treatment of Goodwill in a Partnership
- When there is a change in profit sharing ratio, goodwill is typically written off or rebalanced to reflect the new profit sharing ratio.
- The goodwill is adjusted to prevent any partner from gaining or losing due to the change in profit sharing ratio.
Retirement of a Partner
- When a partner retires, their share in the partnership is transferred to the remaining partners.
- The retiring partner's capital account is closed, and their share is absorbed by the continuing partners.
- The goodwill of the retiring partner is also transferred to the remaining partners.
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Description
Test your knowledge on partnership fundamentals, profit sharing ratio changes, valuation and treatment of goodwill, admission of new partners, retirement and death of partners, and the dissolution of partnerships.
