In which ratio the share of premium of goodwill brought in by the new partner is shared by the old partners?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Sacrificing ratio.
When a new partner brings in a premium for goodwill upon admission to the partnership, this premium is shared by the existing partners in their sacrificing ratio.
Sacrificing ratio refers to the ratio in which the existing partners agree to sacrifice their share of profits in favor of the new partner upon their admission. This ratio is used specifically to distribute any premium paid for goodwill by the new partner.