Suppose A, B and C are partners in a firm sharing profits in the ratio of 3:2:1. D is admitted to the partnership and the profit sharing ratio in future will be 1 : 1 : 1 : 1. In this case 3:2:1 is called the old ratio and 1 : 1 : 1 : 1 is called the new ratio.
If we subtract New ratio from Old ratio then we get the sacrificing ratio of old partners
The key types of questions for finding the new profit ratio depending upon what information is given in question are explained briefly :
- a) Partners old ratio and b) Share of new partner is given. Nothing else is given. (Method of 1 to be used)
- a) Partners old ratio and b) partners sacrificing ratio is given (‘of’ Questions)
- a) partners old ratio and b) amount sacrificed by old partners is given directly (‘From’ questions)
For finding the sacrificing ratio simply subtract new ratio from old ratio. It is to be noted that the sacrificing ratio is found only for old partners whereas new ratio is found for all partners including the new partner.
Also Note that if the old profit sharing ratio is not given in the question, then it is assumed to be equal.