Question

State the ratio in which the old partners share the amount of cash brought in by the new partner as a premium for goodwill.

Answer 1

The old partners distribute the premium for goodwill according to the sacrificing ratio, as this amount represents the compensation paid by the new partner to the existing partners for the share of profits they have given up in favour of the new partner. However, if the profit-sharing ratio between the old partners remains the same, the sacrificing ratio will be the same as their original ratio.