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Question
How is the new profit sharing ratio mathematically stated?
Options
New share of partner = Old share + Acquired share
New share of partner = new share + Acquired share
Either New share of partner = Old share + Acquired share or New share of partner = new share + Acquired share.
None of these
Solution
New share of partner = Old share + Acquired share
Explanation:
When a new partner is accepted, he receives a portion of the earnings from the existing partners. In other words, when a new partner is admitted, the previous partners give up a portion of their earnings to benefit the new partner. However, the old partners and the new partner must agree on the new partner's share and how he would acquire it from the existing partners. If nothing further is said about how the new partner gets his share from the existing partners, it's safe to presume he gets it through their profit-sharing ratio.
