Question

For which of the following situations, the old profit sharing ratio of partners is used at the time of admission of a

new partner?

a. When new partner brings only a part of his share of goodwill.

b. When new partner is not able to bring his share of goodwill.

c. When, at the time of admission, goodwill already appears in the balance sheet.

d. When new partner brings his share of goodwill in cash.​

Answer 1

Answer:

when at the time of admission Goodwill already appear in the balance sheet

Answer 2

Option C is the correct answer i.e., When, at the time of admission, goodwill already appears in the balance sheet.

• When, at the time of admission, goodwill already appears in the balance sheet is the situation, where the old profit-sharing ratio of partners is used at the time of admission of a new partner.

• The previous profit-sharing ratio of the partners is used when a new partner is accepted when goodwill is already present on the balance sheet.
• Other times, the new partner is just expected to make compensation based on the gaining ratio.
• Old partners are required to give up a portion of their current profits upon the admission of a new partner to benefit the new partner.
• The decision to make this sacrifice is made by the new and old partners. The newly chosen ratio then serves as the partners' new profit-sharing ratio.
• The percentage in which all partners, including the new partner, will split future business profits and losses is known as "new profit sharing."
• When a new business partner is accepted, he becomes entitled to share in future profits and losses of the business.

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