Question

Define New Profit-Sharing Ratio in the case of admission of a partner.

Answer 1

When a new partner is admitted in a firm, he acquires his share of profits from the old partners. On the admission of a new partner, the old partners have to sacrifice a certain part of their existing profits in favour of the new partner. This sacrifice is decided among the old partners and the new one(s). The new ratio thus decided becomes the new Profit Sharing Ratio for the partners.