Why is sacrificing ratio not used for distributing reserves?

Correct answer: Reserves are old profits not sacrifice

The direct answer is option A: reserves are old profits, not compensation for sacrifice. A reserve is created from profits earned before the new partner enters. Since those profits belong to the old partners, the reserve is distributed in the old profit-sharing ratio. The sacrificing ratio has a different purpose: it shows the proportion in which old partners give up their future profit share for the incoming partner, and it is commonly used to distribute goodwill compensation paid by the new partner. Step by step: identify the reserve as a past profit; identify the old partners’ old ratio; distribute the reserve in that old ratio. Do not use the sacrificing ratio unless the question specifically concerns a goodwill adjustment. Option A is correct because it states the nature of reserves. Option B is wrong because sacrificing ratio is not a cash ratio; it is a ratio of sacrifice in future profits. Option C is wrong because reserves are past accumulated profits, not new profits after admission. Option D is wrong because sacrificing ratios are not always equal; they depend on the old and new ratios. Memory cue: reserve means old profit, old ratio; goodwill sacrifice means sacrificing ratio.