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At the time of admission of a new partner, new profit sharing ratio is calculated. The new partner acquires his share from the old partners and as a result profit shares of old partners is reduced. What is it known
- a)Gaining Ratio
- b)Sacrificing ratio
- c)Old ratio
- d)New Ratio
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
At the time of admission of a new partner, new profit sharing ratio is...
When a new partner is admitted into a partnership firm, the profit sharing ratio is recalculated to accommodate the new partner. This results in a change in the profit sharing ratios of the existing partners as well. The ratio by which the existing partners sacrifice their share of profits to accommodate the new partner is known as the sacrificing ratio.
Explanation:
Let's say a partnership firm has two partners A and B with a profit sharing ratio of 3:2. Now a new partner C is admitted into the firm. The new profit sharing ratio is decided as 2:2:1 (A:B:C).
The share of profits of the old partners A and B has to be reduced to accommodate the new partner C. Let's assume that the share of profit of partner C is acquired from A and B in the ratio of 1:1. This means that A and B will have to sacrifice a portion of their profit share to accommodate C.
In this scenario, the sacrificing ratio of A and B will be equal and is calculated as follows:
Sacrificing ratio of A = (Old ratio of A - New ratio of A) = (3/5 - 2/5) = 1/5
Sacrificing ratio of B = (Old ratio of B - New ratio of B) = (2/5 - 2/5) = 0
The sacrificing ratio of A is 1/5, which means that A will have to sacrifice 1/5th of his share of profits to accommodate the new partner C. Similarly, the sacrificing ratio of B is 0, which means that B does not have to sacrifice any portion of his share of profits.
Hence, the correct answer is option B, sacrificing ratio.
Explanation:
Let's say a partnership firm has two partners A and B with a profit sharing ratio of 3:2. Now a new partner C is admitted into the firm. The new profit sharing ratio is decided as 2:2:1 (A:B:C).
The share of profits of the old partners A and B has to be reduced to accommodate the new partner C. Let's assume that the share of profit of partner C is acquired from A and B in the ratio of 1:1. This means that A and B will have to sacrifice a portion of their profit share to accommodate C.
In this scenario, the sacrificing ratio of A and B will be equal and is calculated as follows:
Sacrificing ratio of A = (Old ratio of A - New ratio of A) = (3/5 - 2/5) = 1/5
Sacrificing ratio of B = (Old ratio of B - New ratio of B) = (2/5 - 2/5) = 0
The sacrificing ratio of A is 1/5, which means that A will have to sacrifice 1/5th of his share of profits to accommodate the new partner C. Similarly, the sacrificing ratio of B is 0, which means that B does not have to sacrifice any portion of his share of profits.
Hence, the correct answer is option B, sacrificing ratio.
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Community Answer
At the time of admission of a new partner, new profit sharing ratio is...
When a new partner is admitted, old partners will sacrifice some share in favor of new partner, the share they sacrifice in favor of new partner is known as sacrifice share or sacrificing ratio of the old partners.
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At the time of admission of a new partner, new profit sharing ratio is calculated. The new partner acquires his share from the old partners and as a result profit shares of old partners is reduced. What is it knowna)Gaining Ratiob)Sacrificing ratioc)Old ratiod)New RatioCorrect answer is option 'B'. Can you explain this answer?
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