What is the meaning of change in the profit sharing ratio:a)In which all partner including the new partner share future profit and lossb)Purchase of shares of profit by one partner form another partnerc)In which all partner including the deceased partner executor partner share future profit and lossd)In which all partner including the retired partner share future profit and lossCorrect answer is 'B'. Can you explain this answer?

Question

Answer

Change in profit sharing ratio means purchase of share by one partner from other partner or we can say that one partner sacrifice is share of profit in favour of other partner...

Answer

Option B is correct becz whenever there is change in the profit sharing ratio which happens at the time of reconstitution of partnership due to any reasons(admission of partners..retirement...or death... etc)...In that case,the new partner has to take it's share from the existing partners.It means the some of the or all of the existing partners has to sacrifice a part of their share which shows that new partner is purchasing the part share of old partner.In case of retirement also the share of retired partner is being purchased by the continuing partners.

Answer

Due to change in ratio share of some partner may increase in the form of gaining ratio in this case gaining partner compensate the sacrificing partner so due to that compensation payment change in ratio may call purchase of share

Answer

Change in the Profit Sharing Ratio: Meaning and Explanation

a) In which all partners, including the new partner, share future profit and loss:
When a new partner joins an existing partnership, it may be decided to change the profit sharing ratio. In this case, all partners, including the new partner, will share the future profits and losses of the partnership based on the new ratio. This change in the profit sharing ratio reflects the change in the partners' respective contributions and responsibilities within the partnership.

b) Purchase of shares of profit by one partner from another partner:
In this scenario, one partner buys a portion of another partner's share in the profits of the partnership. This can happen for various reasons, such as a partner wanting to reduce their involvement in the business or a partner wanting to increase their stake in the profits. The purchasing partner will now have a higher share in the future profits and losses of the partnership based on the newly agreed-upon ratio.

c) In which all partners, including the deceased partner's executor partner, share future profit and loss:
When a partner passes away, their share in the partnership may be transferred to their executor partner or legal representative. In such cases, the profit sharing ratio is typically adjusted to include the executor partner. This ensures that the deceased partner's share is distributed among the remaining partners and the executor partner, who will now share the future profits and losses based on the revised ratio.

d) In which all partners, including the retired partner, share future profit and loss:
When a partner retires from the partnership, the profit sharing ratio is often altered to reflect the change in the partnership structure. The retiring partner may receive a lump sum payment or periodic payments as compensation for their share in the business. After retirement, the remaining partners will share the future profits and losses based on the adjusted ratio, which excludes the retired partner.

In summary, the correct answer to the question is 'B' - 'Purchase of shares of profit by one partner from another partner.' This option refers to a specific scenario where one partner acquires a portion of another partner's share in the profits of the partnership, resulting in a change in the profit sharing ratio.

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