If it is agreed that the capital of all the partners should be proportionate to the new profit sharing ratio, how will you work out the new capital of each partner? Give examples and state how necessary adjustments will be made.

— Kishore V, SME and ACW at Edumarz

In order to work out the new partner’s capital on a proportionate basis, the subsequent things must be figured out.

Step 1: Calculate the new partner’s share.

Step 2: Calculate the remaining amount.

Step 3: Calculate the adjusted balance of the new partner.

(Adjusted balance = Opening capital + Reserve + Workmen Compensation Fund, if applicable + Investment Fluctuation Fund, if applicable + Share in Profit and Loss (Profit) + Revaluation profit + any liability appropriated + Share in premium for Goodwill – old goodwill written off – Advertisement suspense – Share in Profit and Loss (loss) – any asset appropriated – Revaluation loss – any goodwill withdrawn)

Step 4: Add up the adjusted balances of all of your existing partners.

The firm’s fresh capital is the fifth step.

Step 5: The capital stake of the new partner.