Radha In: 1. Financial Accounting > Ratios What is sacrificing ratio? What is sacrificing ratio? Sacrificing Ratio Share Facebook You must login to add an answer. Username or email* Password* Captcha* Remember Me! Forgot Password? Need An Account, Sign Up Here 1 Answer Voted Recent Rahul_Jose Aspiring CA currently doing Bcom 2021-11-12T16:02:54+00:00Added an answer on November 12, 2021 at 4:02 pm This answer was edited. When a partnership firm consisting of some partners, decide to admit a new partner into their firm, they have to forego a part of their share for the new partner. Therefore, sacrificing Ratio is the proportion in which the existing partners of a company give up a part of their share to give to the new partner. The partners can choose to forego their shares equally or in an agreed proportion. Before admission of the new partner, the existing partners would be sharing their profits in the old ratio. Upon admission, the profit-sharing ratio would change to accommodate the new partner. This would give rise to the new ratio. Hence Sacrificing ratio can be calculated as: Sacrificing Ratio = Old Ratio – New Ratio For example, Tony and Steve are partners in a firm, sharing profits in the ratio of 3:2. They decide to admit Bruce into the partnership such that the new profit-sharing ratio is 2:1:2. Now, to calculate the sacrificing ratio of Tony and Steve, we subtract their new share from their old share. Tony’s Sacrifice = 3/5 – 2/5 = 1/5 Steve’s Sacrifice = 2/5 – 1/5 = 1/5 Therefore, the Sacrificing ratio of Tony and Steve is 1:1. This shows that Tony gave up 1/5th of his share while Steve also sacrificed 1/5th of his share. Calculation of sacrificing ratio is important in a partnership as it helps in measuring that portion of the share of existing partners that have to be sacrificed. This ensures a smooth reconstitution of the partnership. Since the old partners are foregoing a part of their share in profits, the new partner has to bring in some amount as goodwill to compensate for their loss. 0 Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Related Questions What comes in debit side of Realisation account? What is recorded in the Realisation account? What is not included in Realisation account? What is recorded on the credit side of a Realisation account? Can accounts payable have a debit balance? Why is profit on debit side? Is goodwill a fixed asset?