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New Profit Sharing Ratio

Souniya (IPCC) (110 Points)

01 April 2011

Hi Friends,

Please help me in solving below accounts porblem

A&B are partners sharing profits and losses in the ratio of 7:3. They admit C as a partner. A sacrificed 1/7th share and b sacrificed 1/3rd share of his share in favour of C. NPSR will be?

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11 Replies

Tehsinkhan Pathan (CA CMA DISA(ICAI) B.COM) (3956 Points)
Replied 01 April 2011

PROFIT SHARING RATION OF A:B = 7:3

SO AFTER ADMISSION OF C :=

1. 'A' SACRIFICES 1/7TH SHARE OF HIS PROFIT SO NOW A WILL GET [ 7/10 - {7/10*1/7}] 6/10

2. 'B' SACRIFICES 1/3RD SHARE OF HIS PROFIT SO NOW B WILL GET [3/10 - {3/10*1/3}] 2/10

3. NOW 'C' WILL GET THE TOTAL OF WHAT A & B SACRIFICED :[{7/10*1/7} + {3/10*1/3}] 2/10

SO NEW PROFIT SHARING RATIO A:B:C = 6:2:2

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DIVYA PINCHA (ASSISTANT MANAGER:MERCHANT BANKING) (537 Points)
Replied 01 April 2011

THE CORRECT RATIO IS 6:2:2 i.e 3:1:1

1 Like

Madhusudan Kabra (knowledge seeker) (1779 Points)
Replied 01 April 2011

Originally posted by : Tehsinkhan pathan
	PROFIT SHARING RATION OF A:B = 7:3 SO AFTER ADMISSION OF C := 1. 'A' SACRIFICES 1/7TH SHARE OF HIS PROFIT SO NOW A WILL GET [ 7/10 - {7/101/7}] 6/10 2. 'B' SACRIFICES 1/3RD SHARE OF HIS PROFIT SO NOW B WILL GET [3/10 - {3/101/3}] 2/10 3. NOW 'C' WILL GET THE TOTAL OF WHAT A & B SACRIFICED :[{7/101/7} + {3/101/3}] 2/10 SO NEW PROFIT SHARING RATIO A:B:C = 6:2:2

Arniv Sharda (CA Final) (3006 Points)
Replied 01 April 2011

agreed with all

cheers

Mayank Lohana (Owner) (33 Points)
Replied 01 April 2011

Agree with all bt this The easiest way to calculate new PSR in casr of admission/retirement/death:

LET us assume PROFIT=100

SO distribtion of profit before admission of C would b A =70 nd B=30

and after admission of C, A will get 70-10(1/7th)=60, B 30-10(1/3)=20, C=20.

u can apply this logic in each case.

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Souniya (IPCC) (110 Points)
Replied 02 April 2011

Amit,Rohith & Sumit are partners sharing sharing profit & losses in the ratio of 5:4:3. Sumit retries and if Amit & Rohit shares profit of Sumit in 4:3, the NPSR will be?

Ashish Jain (.Net Developer) (641 Points)
Replied 02 April 2011

new ratio of A = 7/10-7/10*1/7 = 7/10-1/10 = 6/10

// // // B = 3/10-3/10*1/3 = 3/10-1/10 = 2/10

// // C = 7/10*1/7+3/10*1/3 = 1/10+1/10 = 2/10

now new ratio A:B:C = 6:2:2 = 3:1:1

sacrificed ratio A:B = 1:1

Mayank Lohana (Owner) (33 Points)
Replied 05 April 2011

Souniya , first assume profit =84( i wl expalin the logic of assumpion if u r interested)

A R S

distribution of profit of 84 before retirement 35 28 21

distribution of profit of 84 after retirement 35 28

Share of sumit share of 21 TO A & R 12 9

total 47 37

so new psr 47:37

1 Like

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 05 April 2011

A R S

PSR before retirement 5/12=.416 4/12=.334 3/12=.250

PSR after retirement .416 .334

Add: Share of S to rest A & B .250*(4/7)=.1428 .250*(3/7)=.1071

NPSR A= .559 B= .441

M. N. JHA (CA) (8316 Points)
Replied 06 April 2011

Originally posted by : Tehsinkhan pathan
	PROFIT SHARING RATION OF A:B = 7:3 SO AFTER ADMISSION OF C := 1. 'A' SACRIFICES 1/7TH SHARE OF HIS PROFIT SO NOW A WILL GET [ 7/10 - {7/101/7}] 6/10 2. 'B' SACRIFICES 1/3RD SHARE OF HIS PROFIT SO NOW B WILL GET [3/10 - {3/101/3}] 2/10 3. NOW 'C' WILL GET THE TOTAL OF WHAT A & B SACRIFICED :[{7/101/7} + {3/101/3}] 2/10 SO NEW PROFIT SHARING RATIO A:B:C = 6:2:2