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?

5:4:1

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