Question

A & B are partner for 5:3. They take C and new profit sharing ratio will be 3:2:1. Profit or loss on revaluation is shared by ____________.

• A. A, B & C in 5:3:2
• B. A & B in 3:2
• C. A & B in 5:3
• D. A & B in sacrificing ratio

Answer 1

The correct option is C A & B in 5:3

When a new partner is admitted into the partnership, assets are revalued and liabilities are reassessed. A revaluation Account is opened for the purpose. This account is debited with all reduction in the value of assets and increase in liabilities and credited with increase in the value of assets and decrease in the value of liabilities. The difference in two sides of account will show profit or loss. This transferred to the capital Accounts of old partners in the old profit sharing ratio.