Chapter 16 - Partnership Changes

Question 1

Intro

Answer 1

If there’s a change in profit sharing ratio, it affects the allocation of profits in that accounting period.

Question 2

Change in Ratios

Answer 2

When allocating profits, we need to split the accounting period around the change in ratio, then deal with each period separately and use the ratios applying for that individual period to determine profit share.

Question 3

Salaries and Interest on Capital

Answer 3

Where the period gets split, we pro rate any salaries and interest based on the length of the period.