Question

Select the most appropriate answer from the alternative given below and rewrite the sentence.

The _____________ ratio is useful for making adjustment for goodwill among the old partners.
a) new
b) sacrifice
c) old
d) Profit and Loss Adjustment

Answer 1

The sacrifice ratio is useful for making adjustment for goodwill among the old partners.

Explanation: Sacrificing ratio is useful for making adjustment of goodwill among the old partners because the amount of goodwill brought in by the new partner is distributed amongst the old partners in their sacrificing ratio. This ratio represents the amount of profits which is foregone by them in favour of the new partner.