When partners change their profit-sharing ratio during the year, each ratio applies only to the profit earned while it was in force. Split the year’s profit into two periods first, then share each period in its own ratio.
This lesson is part of the partnerships chapter. It extends applying a stated partnership agreement.
How do I confirm what my syllabus includes?
Partnership questions can involve admission, retirement or goodwill, and your syllabus may cover some of these and not others. Check the current curriculum document (DSKP) through the BPK website, and confirm with your teacher which conventions your school follows.
If a question states its own treatment, use that. This lesson teaches only the change in profit ratio, which uses the same steps in every convention.
Worked example: A and B
A and B earn a profit of RM96 000 for the year ended 31 December, evenly through the year. They share 1:1 until 30 April and 3:2 from 1 May.
- Count the months. January to April is 4 months, and May to December is 8 months.
- Split the profit. First period: 96 000 × 4/12 = RM32 000. Second period: 96 000 × 8/12 = RM64 000.
- Share each period.
| Period | Profit (RM) | Ratio | A (RM) | B (RM) |
|---|---|---|---|---|
| 1 Jan to 30 Apr | 32 000 | 1:1 | 16 000 | 16 000 |
| 1 May to 31 Dec | 64 000 | 3:2 | 38 400 | 25 600 |
| Total | 96 000 | 54 400 | 41 600 |
The second period: 64 000 ÷ 5 = 12 800, so A gets 3 × 12 800 = 38 400 and B gets 2 × 12 800 = 25 600. A’s total is 16 000 + 38 400 = RM54 400, and B’s is 16 000 + 25 600 = RM41 600. Together they make RM96 000.
The mistake that costs marks
The common slip is to apply the new ratio to the whole year because the new ratio is the one “in force” at year end. A would get 57 600 and B 38 400.
| Step | Wrong | Right |
|---|---|---|
| Ratio used | 3:2 for the full year | 1:1 then 3:2 |
| A’s total | RM57 600 | RM54 400 |
| B’s total | RM38 400 | RM41 600 |
The error moves RM3 200 from B to A. Because the totals still add up to the profit, only checking the periods catches it.
Check yourself
Profit for the year is RM60 000, earned evenly. Partners C and D share 1:1 for the first 3 months and 2:1 for the last 9 months. Find each partner’s total.
Answer
First period: 60 000 × 3/12 = RM15 000, shared 1:1, so 7 500 each.
Second period: 60 000 × 9/12 = RM45 000, shared 2:1, so C gets 30 000 and D gets 15 000.
C: 7 500 + 30 000 = RM37 500. D: 7 500 + 15 000 = RM22 500.
Check: 37 500 + 22 500 = RM60 000.
What to study next
Put the skills together in the partnership changes worked set, which follows one pair of partners through a full set of accounts.
If you want a teacher to confirm the conventions for your year, see online one-to-one Accounting tuition.