DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : N. Sai Ram
Designation : Head of CCP
Institute : Govt. Poly. For women,
Kakinada
Semester : IV Semester
Subject : Accountancy—III
Sub-Code : CCP-402
Topic : Partnership accounts
Duration : 50 minutes
Sub Topic : Admission
Teaching Aids : PPT, animation

CCP402.41 1
Objective
On completion of this period you would be
able to:

 Calculate the New Profit Sharing Ratio under

different circumstances

CCP402.41 2
Recap

In the previous class we have already learned

 Accounting treatment of goodwill under different
Methods

CCP402.41 3
Profit Sharing Ratio

New profit sharing ratio is required to be

calculated whenever:
 There is a change in the no. of partners
(due to admission, retirement or death)
 The existing partners like to change their ratio (even
without a change in the no. of partners)

CCP402.41 4
Profit Sharing Ratio

 Calculation of new profit sharing ratio:

 Case I – When old ratio and new partner’s
share is given:

CCP402.41 5
Illustration

 ‘A’ and ‘B’ are partners sharing profits in 7:3 ratio

 They admitted ‘C’ allowing him a share of 3/7th in
the profits
 Calculate the new profit sharing ratio

CCP402.41 6
Solution
 Total share =1
 C’s share = 3/7
 Remaining share = 1 – 3/7 = 7 – 3 = 4/7
7
 A and B should share the remaining profit in their old
ratio of 7:3
 A’s share = 4/7 x 7/10 = 4/10
 B’s share = 4/7 x 3/10 = 12/70

CCP402.41 7
Solution

 New profit sharing ratio of A, B AND C

 = 4/10 : 12/70 : 3/7

 = 28/70 : 12/70 : 30/70
 = 28 : 12 : 30
 = 14 : 6 : 15

CCP402.41 8
Case - II

 When the new partner obtains a particular

share from each of the existing partners in a
particular ratio, then that share is to be
deducted from their original share to get new
ratio

CCP402.41 9
 Contd..
Case - II

 Illustration
 P & Q are partners with 7:3 ratio. R gets
admission purchasing 2/7th share from P
and1/7th share from Q
 Calculate new profit sharing ratio

CCP402.41 10
Solution
 P’s original share = 7/10
 Portion surrendered by P = 2/7
 So P’s new share = 7/10 – 2/7
 = 49 –20 = 29
70 70

CCP402.41 11
 Contd..

Solution
 Q’s original share = 3/10
 Portion surrendered by Q = 1/7
 So Q’s new share = 3/10 – 1/7
 = 21 –10 = 11
70 70

CCP402.41 12
 Contd..
Solution

 R’s share = 2/7 + 1/7

 = 3/7 or
 = 30/70
 New profit sharing ratio = 29 : 11 : 30

CCP402.41 13
Case - III
 When existing partners surrender a particular
fraction of their share, then the fraction
surrendered by them is to be calculated
 ILLUSTRATION
 X and Y are partners sharing profits in 7:3 ratio
 They admitted Z as partner. X surrendered 1/7th
of his share. Y surrendered 1/3rd of his share
 Calculate their new profit sharing ratio

CCP402.41 14
Solution
 Original share of X = 7/10
 His surrender to Z = 1/7th of his share
 = 7/10 * 1/7 = 1/10
 So New share of X = 7/10 – 1/10 = 6/10

CCP402.41 15
 Contd..
Solution
 Original share of Y = 3/10
 His surrender to Z = 1/3rd of his share
 = 3/10 * 1/3 = 1/10
 So New share of Y = 3/10 – 1/10 = 2/10

CCP402.41 16
 Contd..
Solution
 Z’s share = 1/10 + 1/10 = 2/10

 so new profit sharing ratio

 6/10 : 2/10 : 2/10 = 6 : 2 : 2

 X:Y:Z =3:1:1

CCP402.41 17
Summary

New profit sharing is to be calculated:

 when there is change in the no. of members
 when the existing partners want to change their
ratio

CCP402.41 18
Summary

Different circumstances under which

profit sharing ratio is calculated
 When the share of new partner is given
 When new partner obtains a particular share
from existing partner in a particular ratio
 When existing partners surrender a particular
fraction of their share

CCP402.41 19