Reconstitution of a Partnership Firm - Admission of a Partner
Sacrificing ratio
Find each old partner's sacrifice or gain.
The sacrificing ratio is the ratio in which the old partners give up their shares in favour of the new partner. For each old partner:
Sacrifice = old share − new share
Write the shares with a common denominator and subtract. For example, if Rohit and Mohit share 5:3, and the new ratio with a new partner is 4:2:1: Rohit's sacrifice is 5/8 − 4/7 = 3/56, and Mohit's is 3/8 − 2/7 = 5/56. Sacrificing ratio 3:5.
Why does it matter? The new partner pays a premium for goodwill, as compensation to the partners who gave up part of their share. That premium is shared among the old partners in the sacrificing ratio.
If nothing is said about how the new partner takes his share, the old partners sacrifice in their old ratio, so the sacrificing ratio equals the old ratio.
Sometimes the calculation gives a negative figure for one old partner. That partner has not sacrificed at all: he has gained.
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