In this Video We Will Discuss the Computation Of Profit Sharing Ratio Admission Of Partner all Concepts, Problems and Examples for CA Foundation and CA Foundation Chapter 8 Concept Computation of the Profit-Sharing Ratio has been Discussed by Chandan Poddar Sir for CA Foundation Grooming Education.
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Time Stamp:
0:00 Intro
0:15 Admission of Partner
18:31 Computation of New Profit Sharing Ratio/Sacrificing Ratio
19:25 Case 1
35:22 Case 2
41:29 Case 3
52:07 Case 4
59:59 Case 5
1:05:49 Case 6
1:25:47 Case 7
1:30:58 Case 8
81:36:21 Case 9
1. New profit sharing ratio
It is necessary to determine the new profit sharing ratio at the time of admission of a partner because the new partner is entitled to share the future profits of the firm. New profit sharing ratio is the agreed proportion in which future profit will be distributed to all the partners including the new partner. If the new profit sharing ratio is not agreed, the partners will share the profits and losses equally.
2. Sacrificing ratio
The old partners may sacrifice a portion of the share of profit to the new partner. The sacrifice may be made by all the partners or some of the partners. Sacrificing ratio is the proportion of the profit which is sacrificed or foregone by the old partners in favour of the new partner. The purpose of finding the sacrificing ratio is to share the goodwill brought in by the new partner. The share sacrificed is calculated by deducting the new share from the old share.
Share sacrificed = Old share - New share
Sacrificing ratio = Ratio of share sacrificed by the old partners
Share of the new partner is the sum of shares sacrificed by the old partners.
1. When new profit sharing ratio is given
When new profit sharing ratio is given, sacrificing ratio has to be calculated as follows:
Sacrificing ratio = Ratio of share sacrificed by the old partners
Share sacrificed = Old share - New share
2. When new profit sharing ratio is not given
(a) When share sacrificed is given
When new profit sharing ratio is not given, but the share sacrificed by the old partner(s) is given, new profit sharing ratio is calculated as follows:
New Share of Old Partner = Old Share - Share Sacrificed
Share of new partner = Sum of shares sacrificed by old partners
(b) When proportion of share sacrificed is given
(i) When share sacrificed is given as a proportion on old partners’ share
When new profit sharing ratio is not given, but the share sacrificed is given as a proportion on old partners’ share, new profit sharing ratio is calculated as follows:
Share sacrificed by old partner = Old share x Proportion of share sacrificed
New share of old partner = Old share - Share sacrificed
Share of new partner = Sum of shares sacrificed by old partners
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