Page 6 - Lesson Note 1

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.

Step 4 Calculate the surplus/deficit capital by comparing step 2 and 3.

Case 3

When the outgoing partner is to be paid through cash brought by the continuing

partners in such a way as to make their capitals proportionate to their new profit
sharing ratio

Steps involved in adjusting the capitals of 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 capital of continuing partners.

Step 4 Calculate the surplus/deficit by comparing step 2 and 3 above.