Question

when there are four partner. excess capital is to be computed
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Answer 1

The various steps involved in adjusting the capitals of the partners are given below:

Step 1 Calculate the adjusted old capitals of continuing partners after all other adjustments.

Step 2 Calculate total capital of the new firm.

Step 3 Calculate the new capitals of continuing partners.

Answer 2

Explanation:

In general when a new partner is admitted to a company or business, the then profit or loss appearing in the balance sheet of the company or excess capital is first adjusted to the old four partners and distribution is according to their profit sharing percentages. Hence the balance sheet will show the reserve profits and its distribution