Question

What is sacrificing ratio? Why is it calculated?

Answer 1

Sacrificing ratio is simply the difference between the old ratio and the new ratio of the old partners. In other words, sacrificing ratio simply refers to the ratio in which the old partners of a partnership firm surrender their share of profit in favor of the new partner.

Sacrificing Ratio = Old Ratio — New Ratio

The calculation of sacrificing ratio is very much important, as the new partner need to compensate the old partners for sacrificing their share of profit. The new partner compensates the old partners by making payment to them in their sacrificing ratio.