Question

WHY IT IS NECESSARY TO ASCERTAIN NEW PROFIT SHARING RATIO EVEN FOR OLD PARTNERS WHEN A NEW PARTNER IS ADMITTED?

Answer 1

When a new partner is admitted into the partnership, the incoming partner takes a part of the total profit which was earlier being shared between the old partners in their agreed ratio.Now when this new partner comes in,he will take his share from this total share only.So obviously,the share of profit available to the old partners ,will be the total profit minus the share of the new partner.So this creates the need for calculating the new profit sharing ratio among the partners since the profits now cannot be distributed in the same ratio as they were being shared before. Hope that's of some help. :)