Question

In the absence of an express agreement as to who will contribute to the new partners’ share of profit, it is implied that the old partners will contribute ______.

Options

• Equally

• In the ratio of their capitals

• In their old profit-sharing ratio

• In the gaining ratio

Answer 1

In the absence of an express agreement as to who will contribute to the new partners’ share of profit, it is implied that the old partners will contribute in their old profit-sharing ratio.

Explanation:

According to established accounting principles for partnership admissions, if the new partner’s method of acquiring their share is not specified in the agreement:

1. Default Assumption: It is assumed that the new partner acquires their share from the old partners in the same proportion as the old partners shared profits among themselves originally.
2. Sacrificing Ratio: Consequently, the sacrificing ratio (the ratio in which they give up their share) is assumed to be the same as the old profit-sharing ratio.