Question

In which ratio, the cash brought in for goodwill by the new partner is shared by the existing partners?

• A. Profit sharing ratio
• B. Capital ratio
• C. Sacrificing ratio
• D. Old ratio

Hint:

Goodwill = compensation for sacrifice → distributed to old partners in sacrificing ratio.

Answer 1

The Correct Option is C

Step 1: Meaning of sacrificing ratio.
Sacrificing ratio = the ratio in which old partners sacrifice their share of profit in favour of the new partner.
Step 2: Treatment of goodwill.
The amount of goodwill brought by the new partner is distributed to the old partners in their sacrificing ratio, to compensate them for loss of future profits.
Step 3: Conclude.
Hence, goodwill is always shared in sacrificing ratio.
Final Answer: \[ \boxed{\text{Sacrificing ratio}} \]