:P and Q were partners sharing profits/losses as 4 : 3. R is admitted as a new part-ner for 1/5 th share. P and Q decide to share the balance of profits equally.
:R’s share = 1/5 Balance = 1- 1/5 = 4/5.P’s share = 4/5 x 1/2 = 4/10; Q’s share = 4/5 x 1/2 = 4/10; R’s share = 1/5 = 2/10.New Ratio = 4 : 4 : 2 or 2 : 2 : 1.(d)If the sacrifice made individually by the existing partners is given then New Ratio shouldbe calculated by deducting the sacrifice from the old ratio.
:A, B & C were partners sharing profits/loses as 3 : 2: 1. They admitted D as a newpartner giving him 1/6th share of future profits. D acquired 3/24 th share from Aand 1/24 share from B. Calculate the new Profit Sharing Ratio.
:New Ratio = Old Ratio – Sacrifice RatioA=3/6 – 3/24 = 12/24 – 3/24 = 9/24; B=2/6-1/24 = 8/24 – 1/24 = 7/24; C=1/6 –Nil = 4/24 – Nil = 4/24; D=3/24 + 1/24=4/24 The new ratio = 9 : 7 : 4 : 4.
Thus regarding Profit Sharing Ratio we can sum up as follows :-
=Profit Sharing Ratio of existing Partners (before admission of newpartner)=Given or Equal ( If not mentioned )2.
=Future Profit Sharing Ratio among all partners (including newpartner, after his admission)=Given
= Old Ratio – Sacrificing Ratio made by each of existingpartners.3.
=Share of an existing partner under Old Ratio – his Share undernew ratio.
But unless otherwise mentioned the mutual profit sharing Ratio between the existingpartners will remain unaltered. In that case Sacrifice Ratio = Old Ratio.
It will be evident from subsequent discussions that proper use of the above ratios will be re-quired for solving problems regarding Admission of a new partner.
Adjustment Regarding Valuation of Assets and Liabilities
: The Book values of assets asshown in the Balance Sheet may not reflect their current realizable values. Similarly theliabilities included in the Balance Sheet may not exhibit their actual position. Whenever achange takes place in a partnership business in the form of admission or retirement ordeath of a partner or due to change in profit sharing ratio, revaluation of assets or liabili-ties become necessary.