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Why is It Necessary to Ascertain New Profit Sharing Ratio Even for Old Partners When a New Partner is Admitted? - Accountancy

Short Note

Why i is it necessary to ascertain new profit sharing ratio even for old partners when a new partner is admitted?

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Solution

When new partner/s is/are admitted, then the old partners in the partnership firm need to sacrifice their share of profit in favour of the new partner/s. This reduces the share of profit of the old partners ,hence, it is necessary to ascertain the new profit sharing ratio even for the old partners in the event of admission of new partner/s.

Concept: Retirement and Death of a Partner - Calculation of New Profit Sharing Ratio
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APPEARS IN

NCERT Class 12 Accountancy - Not-for-profit Organisation and Partnership Accounts
Chapter 3 Reconstitution of a Partnership Firm – Admission of a Partner
Exercise | Q 2 | Page 164
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