The correct answer is Option (4) → (C), (B), (A)
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(C) Calculation of new profit sharing ratio and sacrificing ratio: This is the most fundamental first step. The new profit-sharing agreement must be defined to determine how much the old partners are sacrificing, which is essential for compensating them for goodwill.
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(B) Valuation of goodwill: Once the sacrificing ratio is known, goodwill is valued and adjusted. The incoming partner brings in a premium for goodwill, which is distributed to the sacrificing partners in the sacrificing ratio calculated in the previous step (C).
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(A) Adjustments of capital accounts: This is the final step in the sequence. It is done after all preliminary adjustments (like revaluation of assets/liabilities, distribution of reserves, and goodwill adjustment) are completed. The partners' capital accounts are often adjusted (e.g., to be proportional to the new profit-sharing ratio) after determining their adjusted balances.
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