CPSR Flashcards
What is the formula to calculate the new profit sharing ratio when a new partner is admitted?
New profit sharing ratio = Old profit sharing ratio * Old capital + New partner’s capital / Total capital after admission
True or False: When calculating the new profit sharing ratio, the old profit sharing ratio remains the same.
False
What does the term ‘Old capital’ represent in the formula for calculating the new profit sharing ratio?
The capital contributed by the existing partners before the admission of the new partner
Fill in the blank: New profit sharing ratio = Old profit sharing ratio * Old capital + ________ / Total capital after admission
New partner’s capital
What is the significance of calculating the new profit sharing ratio when a new partner is admitted?
It helps determine the distribution of profits among partners in the new scenario
In the formula for calculating the new profit sharing ratio, what does ‘Total capital after admission’ represent?
The total capital contributed by all partners after the admission of the new partner
What happens to the old profit sharing ratio when a new partner is admitted?
It changes to reflect the new distribution of profits among partners
What is the formula to calculate the new profit sharing ratio when an existing partner’s share is reduced?
New profit sharing ratio = Old profit sharing ratio * Old capital - Partner’s capital reduced / Total capital after reduction
True or False: When an existing partner’s share is reduced, the total capital after reduction decreases.
False
What is the purpose of calculating the new profit sharing ratio when an existing partner’s share is reduced?
To determine the revised distribution of profits among partners
Fill in the blank: New profit sharing ratio = Old profit sharing ratio * Old capital - ________ / Total capital after reduction
Partner’s capital reduced
What is the role of the old profit sharing ratio in the formula for calculating the new profit sharing ratio with a reduced share for an existing partner?
It serves as the basis for determining the new profit sharing ratio
In the context of profit sharing ratios, what does ‘Partner’s capital reduced’ refer to?
The decrease in capital contributed by an existing partner
What factors are taken into account when calculating the new profit sharing ratio?
Old profit sharing ratio, old capital, new partner’s capital, total capital after admission or reduction
What is the outcome of determining the new profit sharing ratio in a partnership?
It establishes the proportion of profits each partner is entitled to receive
How does the new profit sharing ratio impact the financial arrangements within a partnership?
It influences how profits are divided among partners based on their contributions
What is the formula to calculate the new profit sharing ratio when an existing partner’s share is increased?
New profit sharing ratio = Old profit sharing ratio * Old capital + Partner’s capital increased / Total capital after increase
True or False: When an existing partner’s share is increased, the total capital after increase decreases.
False
What is the purpose of determining the new profit sharing ratio when an existing partner’s share is increased?
To adjust the distribution of profits among partners to reflect the change in share
Fill in the blank: New profit sharing ratio = Old profit sharing ratio * Old capital + ________ / Total capital after increase
Partner’s capital increased
What is the significance of recalculating the profit sharing ratio with an increased share for an existing partner?
It ensures a fair distribution of profits based on the updated capital contributions
In the context of partnership agreements, why is it important to have a clear understanding of the profit sharing ratios?
To avoid disputes and ensure transparency in profit distribution
What is the key benefit of using formulas to calculate new profit sharing ratios in a partnership?
It provides a systematic approach to adjusting profit distributions based on changes in the partnership structure
How does the calculation of new profit sharing ratios contribute to the financial stability of a partnership?
By maintaining a fair and equitable distribution of profits among partners
What is the formula for determining the new profit sharing ratio when a partner’s share is completely transferred to another partner?
New profit sharing ratio = Old profit sharing ratio * Old capital - Partner’s capital transferred / Total capital after transfer
True or False: When a partner’s share is completely transferred to another partner, the total capital after transfer remains the same.
True
