NEW PROFIT SHARING RATIO
When a new partner is admitted then
the calculation of new profit sharing ratio becomes necessary. The reason
behind that is the new partner acquires his share of profit from the old
partners. Hence, old partners’ shares reduce.
1. When only the ratio of new partner is
given: In this
case in the absence of any other agreement, it is presumed that the old
partners will continue to share the remaining profits in the same ratio in
which they were sharing before the admission of the new partner.
Example: X, Y and Z are partners in proportion of 3/6, 2/6 and 1/6
respectively. P was admitted in the firm as a new partner with 1/6th
share. Calculate the new profit sharing ratios of the partners.
Solution:
Let total profit be = 1
Share given to P = 1/6
Remaining Share = 1 – 1/6 = 5/6
Now the old partners will share this
remaining profit in their old profit sharing ratios. Hence,
X’s share = 3/6 of 5/6 = 5/12
Y’s share = 2/6 of 5/6 = 5/18
Z’s share = 1/6 of 5/6 = 5/36
Thus, the new profit sharing ratio
will be
X
: Y :
Z : P
5/12
: 5/18 :
5/36 : 1/6 =
15 :
10 : 5
: 6
2. When the new partner purchases his
share of profit from the old partners equally : In such cases, the new profit sharing
ratio of the old partners can be calculated by deducting the sacrifice made by
them from their existing share of profit.
Example: A and B are partners sharing profits and losses in the ratio
of 7/12 : 5/12. They admit C as a new partner for 1/6th share, which
he acquires equally from A and B. Calculate the new profit sharing ratios of
the partners
Solution:
Share of profits given to C = 1/6
Share acquired by C from A = ½ of 1/6
= 1/12
Share acquired by C from B = ½ of 1/6
= 1/12
Therefore,
A’s new share = 7/12 – 1/12 = 6/12
B’s new share = 5/12 – 1/12 = 4/12
C’s share = 1/6
Hence, new profit sharing ratio will
be
A : B : C
6/12 :
4/12 : 1/6
=
3 : 2 : 1
3. When new partner purchases his share
from the old partners in a particular ratio: In this case, the new profit sharing
ratio of the old partners will be ascertained after deducting the sacrifice
made by them from their existing share of profit.
Example: X and Y are partners in a firm sharing profits in the ratio
of 7 : 5. Z is admitted on 1/6th share which he takes 1/24th
from X and 1/8th from Y. Calculate the new profit sharing of the
partners.
Solution:
X’s old share = 7/12, out of which he
surrenders 1/24th in favour of Z.
Therefore, X’s new share = 7/12 –
1/24 = 13/24
Y’s old share = 5/12, out of which he
surrenders 1/8th in favour of Z.
Therefore, Y’s new share = 5/12 – 1/8
= 7/24
Z’s share = 1/6
Hence, new profit sharing ratio will
be
X :
Y : Z
13/24 :
7/24 : 1/6
=
13 : 7 : 4
4. When old partners surrender a
particular fraction of their share in favour of the new partner: in such case, the new partner’s share
is calculated by adding the surrendered portion of share by the old partners.
Example: P and Q are partners in a firm sharing profits and losses in
the ratio of 3:2. A new partner R is admitted. P surrenders 1/5th
share of his profit in favour of R and Q 2/5th share of his profit
in favour of R. Calculate the new ratio of the partners.
Solution:
P’s old share = 3/5
P surrenders 1/5th of 3/5
in favour of R i.e. 1/5 X 3/5 = 3/25
Q’s old share = 2/5
Q surrenders 2/5th of 2/5
in favour of R i.e. 2/5 X 2/5 = 4/25
P’s new share after surrendering 3/25
in favour of R = 3/5 – 3/25 = 12/25
Q’s new share after surrendering 4/25
in favour of R = 2/5 – 4/25 = 6/25
R’s share is the total of 3/25 from P
and 4/25 from Q = 3/25 + 4/25 = 7/25
Therefore, new ratio will be
P
: Q
: R
12/25 :
6/25 : 7/25
=
12 : 6 : 7
It is really a nice blogs. Thanks
ReplyDelete