The amount of premium for goodwill brought in by the new partner is shared by the existing partners in their:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Sacrificing ratio
The new partner pays a premium for goodwill to compensate the old partners for the share of future profit they give up to him. So it goes to those who gave something up, in proportion to what each gave up: the sacrificing ratio (old share − new share).
Why the other options are incorrect
Option (1) Profit sharing ratio — Incorrect. The old ratio gives the right split only when the old partners give up their shares in that same ratio. Where they give up unequal portions, it would reward a partner who sacrificed less.
Option (2) Capital ratio — Incorrect. The capital a partner holds has no link with the share of profit he gave up, so it cannot measure his compensation.
Option (4) Gaining ratio — Incorrect. The gaining ratio is used on retirement or death, where the continuing partners gain a share and pay the outgoing partner for it. On admission the old partners do not gain; they give up.
NCERT (2026-27 edition): |