Capitals in Profit Sharing Ratio

After the retirement of a partner, the remaining partners may decide that their capitals be in their new profit sharing ratio. For this purpose, the total capital of the new firm may be fixed which will then be divided among the remaining partners in their new profit sharing ratio. Alternatively, the total of the balance of capital accounts of the remaining partners after all the adjustments in respect of retirement have been made may be considered to be the total capital of the firm which may then be reallocated to the different partners in their new profit sharing ratio. The adjustments in the capital accounts for this purpose may be made either by bringing in or payment of cash or through current accounts.