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What is the simplest way to check the new profit-sharing ratio?

Answer and explanation

Correct answer: Add all profit shares and check that their total is 1 (or 100%)

The shares of all partners in a new profit-sharing ratio must add up to 1 or 100%, because the entire profit is distributed among these partners. Therefore, adding the shares is the simplest way to verify the ratio. Capital and cash balances do not determine the total of the profit-sharing ratio. In an examination, check that fractions total 1 and percentages total 100%.

Related tags

AccountancyAdmission-Of-PartnerNew-Profit-Sharing-RatioPartnership-FirmClass-12New Profit Sharing RatioReconstitution Admission Of A PartnerClass 12 Mcq

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