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Why there is need to calculate New profit share ratio
- a)After retirement of a partner, there is no change in the continuing partners’ ratio.
- b)After retirement of a partner, there will be change in the continuing partners’ ratio.
- c)To settle the loan amount due to outgoing partner
- d)Both After retirement of a partner, there will be change in the continuing partners’ ratio. and After retirement of a partner, there is no change in the continuing partners’ ratio.
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
Why there is need to calculate New profit share ratioa)After retiremen...
When a partner is retired from the firm, there will be change in the ratio of remaining partners. It is necessary to find out the new ratio of existing partners.
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Why there is need to calculate New profit share ratioa)After retiremen...
Understanding Profit Share Ratio After Partner Retirement
When a partner retires from a partnership, the profit-sharing ratio among the remaining partners needs to be recalculated. Here's why option 'B' is the correct answer.
Change in Profit Share Ratio
- After the retirement of a partner, the existing partners must adjust their profit-sharing ratio.
- This adjustment is necessary because the retiring partner’s share of profits needs to be redistributed among the continuing partners.
- The total profit available for distribution remains the same, but the absence of the retiring partner means the remaining partners must take on a greater share of that profit.
Factors Influencing the Change
- The new profit share ratio is determined based on various factors, including:
- The existing profit-sharing ratio among the continuing partners.
- Any agreements made between the partners regarding the distribution of the retiring partner's share.
- Contributions made by partners in terms of capital or expertise.
Implications of Not Adjusting the Ratio
- If the profit share ratio is not recalculated:
- It may lead to unfair profit distribution, with continuing partners receiving less than their entitled share.
- This can create conflicts and dissatisfaction among partners, affecting the overall partnership dynamics.
Conclusion
In conclusion, option 'B' is correct because the retirement of a partner necessitates a change in the profit-sharing ratio among the continuing partners. This recalibration ensures fair distribution and alignment of interests, which is vital for the smooth functioning of the partnership.
When a partner retires from a partnership, the profit-sharing ratio among the remaining partners needs to be recalculated. Here's why option 'B' is the correct answer.
Change in Profit Share Ratio
- After the retirement of a partner, the existing partners must adjust their profit-sharing ratio.
- This adjustment is necessary because the retiring partner’s share of profits needs to be redistributed among the continuing partners.
- The total profit available for distribution remains the same, but the absence of the retiring partner means the remaining partners must take on a greater share of that profit.
Factors Influencing the Change
- The new profit share ratio is determined based on various factors, including:
- The existing profit-sharing ratio among the continuing partners.
- Any agreements made between the partners regarding the distribution of the retiring partner's share.
- Contributions made by partners in terms of capital or expertise.
Implications of Not Adjusting the Ratio
- If the profit share ratio is not recalculated:
- It may lead to unfair profit distribution, with continuing partners receiving less than their entitled share.
- This can create conflicts and dissatisfaction among partners, affecting the overall partnership dynamics.
Conclusion
In conclusion, option 'B' is correct because the retirement of a partner necessitates a change in the profit-sharing ratio among the continuing partners. This recalibration ensures fair distribution and alignment of interests, which is vital for the smooth functioning of the partnership.
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Why there is need to calculate New profit share ratioa)After retirement of a partner, there is no change in the continuing partners’ ratio.b)After retirement of a partner, there will be change in the continuing partners’ ratio.c)To settle the loan amount due to outgoing partnerd)Both After retirement of a partner, there will be change in the continuing partners’ ratio. and After retirement of a partner, there is no change in the continuing partners’ ratio.Correct answer is option 'B'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Why there is need to calculate New profit share ratioa)After retirement of a partner, there is no change in the continuing partners’ ratio.b)After retirement of a partner, there will be change in the continuing partners’ ratio.c)To settle the loan amount due to outgoing partnerd)Both After retirement of a partner, there will be change in the continuing partners’ ratio. and After retirement of a partner, there is no change in the continuing partners’ ratio.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Why there is need to calculate New profit share ratioa)After retirement of a partner, there is no change in the continuing partners’ ratio.b)After retirement of a partner, there will be change in the continuing partners’ ratio.c)To settle the loan amount due to outgoing partnerd)Both After retirement of a partner, there will be change in the continuing partners’ ratio. and After retirement of a partner, there is no change in the continuing partners’ ratio.Correct answer is option 'B'. Can you explain this answer?.
Why there is need to calculate New profit share ratioa)After retirement of a partner, there is no change in the continuing partners’ ratio.b)After retirement of a partner, there will be change in the continuing partners’ ratio.c)To settle the loan amount due to outgoing partnerd)Both After retirement of a partner, there will be change in the continuing partners’ ratio. and After retirement of a partner, there is no change in the continuing partners’ ratio.Correct answer is option 'B'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Why there is need to calculate New profit share ratioa)After retirement of a partner, there is no change in the continuing partners’ ratio.b)After retirement of a partner, there will be change in the continuing partners’ ratio.c)To settle the loan amount due to outgoing partnerd)Both After retirement of a partner, there will be change in the continuing partners’ ratio. and After retirement of a partner, there is no change in the continuing partners’ ratio.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Why there is need to calculate New profit share ratioa)After retirement of a partner, there is no change in the continuing partners’ ratio.b)After retirement of a partner, there will be change in the continuing partners’ ratio.c)To settle the loan amount due to outgoing partnerd)Both After retirement of a partner, there will be change in the continuing partners’ ratio. and After retirement of a partner, there is no change in the continuing partners’ ratio.Correct answer is option 'B'. Can you explain this answer?.
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