Illustration of change in profit sharing ratio, Financial Accounting

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Illustration of change in profit sharing ratio

A, B and C have been trading as equal partners having capital contributions of £400,000, £300,000 and £200,000 respectively. They deaded to change their profit sharing ratio to 3:2:1. Goodwill was agreed at £150,000.

Required:
Prepare their capital accounts to show their new capital balances assuming that goodwill in not to be retained in the accounts.

Capital account
	A	B	C		A	B	C
Goodwill	75,000	50,000	25,000	Bal. b/d	400,000	300,000	200,000
Bal. c/d	375,000	300,000	225,000	Goodwill	50,000	50,000	50,000
	450,000	350,000	250,000		450,000	350,000	250,000

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