When is the new profit-sharing ratio used?

Correct answer: For sharing profit after admission

The governing concept is that admission changes the partnership agreement and therefore changes the proportions in which future profits and losses are shared. The new profit-sharing ratio applies from the date on which the new partner is admitted, subject to the terms of the agreement. Profits belonging to the period before admission are divided according to the old ratio because the incoming partner was not yet a partner. Thus option A is correct. Options C and D concern unrelated accounting activities, and option B incorrectly applies the new arrangement retrospectively to earlier profits.