Arrange in correct sequence at a time of admission of partner-

(A) Adjustments of capital accounts.

(B) Valuation of goodwill

(C) Calculation of new profit sharing ratio and sacrificing ratio.

Choose the correct answer from the options given below:

(C), (B), (A)

The correct answer is option 4- (C), (B), (A).

(C) Calculation of new profit sharing ratio and sacrificing ratio. First, existing partners decide how the profits will be shared in the future. The sacrificing ratio is calculated to determine how much profit the old partners are giving up for the new partner. The ratio in which the old partners agree to sacrifice their share of profit in favour of the incoming partner is called sacrificing ratio. 

(B) Valuation of goodwill- Based on the sacrificing ratio, the new partner compensates old partners for goodwill (i.e., their past efforts and reputation). 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.

(A) Adjustment of capital accounts- Finally, partners adjust their capital accounts based on the new agreement.