A and B are in partnership firm and sharing profits in the ratio of 3 : 2. They take C as a new partner. Goodwill of the firm is valued at ₹3,00,000 and C brings ₹30,000 as his share of goodwill in cash which is entirely credited to the Capital Account of A. What will be the new profit sharing ratio?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- 5:4:1.
Goodwill of the firm on C's admission = ₹3,00,000
Premium for goodwill brought in cash by C = ₹30,000
So, Cs share in future profit of the firm = 30,000/3,00,000
= 1/10
A's account has only been credited by the premium brought in by C.
So, A's Sacrificing Share = Profit Share of C = 1/10
New Profit share of A = Old profit share - Sacrificing share
= 3/5 -1/10
= (6-1)/10
= 5/10
B's new share = 1- 5/10 - 1/10
= (10-5-1)/10
= 4/10
Therefore, New Profit Sharing Ratio = 5/10 : 4/10 : 1/10
= 5:4:1