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When a new partner brings goodwill in cash on admission, among which partners is this amount generally distributed?

Answer and explanation

Correct answer: Among the old partners in their sacrificing ratio

A new partner compensates old partners for the share of future profits they sacrifice. Therefore, goodwill brought in cash is distributed among old partners in the sacrificing ratio, not the old ratio. Exam tip: Sacrificing ratio = old ratio − new ratio.

Related tags

Partnership AccountsGoodwillAdmission Of PartnerSacrificing RatioClass 12 AccountancyPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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