What does the sacrificing ratio refer to in the admission of a new partner?

The ratio at which the existing partners sacrifice their share in profits

The correct answer is option 1- The ratio at which the existing partners sacrifice their share in profits.

The sacrificing ratio refers to the ratio at which the existing partners sacrifice their share in profits.

In the context of admitting a new partner to a partnership firm, the ratio in which the old partners agree to sacrifice their share of profit in favour of the incoming partner is called sacrificing ratio. The sacrifice by a partner is equal to:

Old Share of Profit – New Share of Profit.

The new partner is required to compensate the old partner’s for their loss of share in the super profits of the firm for which he brings in an additional amount as premium for goodwill. This amount is shared by the existing partners in the ratio in which they forgo their shares in favour of the new partner which is called sacrificing ratio. The ratio is normally clearly given as agreed among the partners which could be the old ratio, equal sacrifice, or a specified ratio. The difficulty arises where the ratio in which the new partner acquires his share from the old partners is not specified. Instead, the new profit sharing ratio is given. In such a situation, the sacrificing ratio is to be worked out by deducting each partner’s new share from his old share.