Question

The goodwill brought in cash by a new partner is shared by the existing partners in:

• A. New profit-sharing ratio
• B. Old profit-sharing ratio
• C. Sacrificing ratio
• D. Gaining ratio

Hint:

The sacrificing ratio is used to share the goodwill brought in by a new partner. It reflects how much profit the existing partners are willing to give up.

Answer 1

The Correct Option is C

Step 1: Understanding the sharing of goodwill.
When a new partner brings goodwill into the firm, it is shared by the existing partners. The sharing is done based on the sacrificing ratio, which reflects the amount of profit the existing partners are giving up to accommodate the new partner.
Step 2: Analysis of other options.

• (A) New profit-sharing ratio: Incorrect. The new profit-sharing ratio is determined after the goodwill has been shared, but it is not used to share the goodwill.
• (B) Old profit-sharing ratio: Incorrect. The old profit-sharing ratio is the basis for profit distribution before the new partner joins, but it is not used for sharing the goodwill brought in by the new partner.
• (C) Sacrificing ratio: Correct. The existing partners share the goodwill based on their sacrificing ratio, which represents the proportion of their profit they are sacrificing for the new partner.
• (D) Gaining ratio: Incorrect. The gaining ratio is used to distribute the profits after the new partner joins, not for sharing the goodwill.

Step 3: Conclusion.
Thus, the goodwill is shared by the existing partners in the sacrificing ratio. Final Answer:} Sacrificing ratio.