Video narration
What happens when a new member adds money to your class project fund-is that contribution the fund's total? Not automatically. First, identify the new partner's profit-sharing fraction and check whether capital follows that share. When it does, total capital equals the new partner's capital divided by the new partner's share. Now rebuild the fund for every partner. Required capital equals total capital multiplied by that partner's new profit-sharing fraction. Compare it with their existing capital: if the required amount is higher, they bring in the difference; if it is lower, they withdraw the excess. Keep goodwill separate. Do not add goodwill to capital unless the question specifically says so. So, in the class fund and in the firm, the new member's contribution reveals the whole only through their ownership share. Divide by that share-and you have the total capital to check and balance everyone's contribution.