Reconstitution- Change in Existing Profit Sharing Ratio

❖ Reconstitution of a Partnership Firm

It implies change in the existing partnership deed or agreement among the partners in a partnership firm.

❖ Modes of Reconstitution of a Partnership Firm

❖ Meaning of Change in Profit Sharing Ratio among Existing Partners

It refers to the mutual agreement among the partners to change their existing relationship of sharing profits and losses in future.

❖ Adjustment at the time of Change in Profit Sharing Ratio

• Calculation of New Profit Sharing Ratio
• Adjustment of Goodwill
• Treatment of Reserves
• Adjustment of Accumulated Profits and Losses
• Revaluation of Assets and Reassessment of Liabilities

❖ New Profit Sharing Ratio

The ratio in which all the partners have agreed to share the future profits and losses is regarded as new profit sharing ratio.
Algebraically,
New Ratio = Old Ratio – Share Surrendered/+Share Acquired

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