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Question

A, B and C are partners in a firm sharing profits and losses in the ratio of 4 : 3 : 2. They agreed to take D into partnership and gave him $\frac{1}{8}$ share. What will be their new profit sharing ratio ?

The correct answer is
28 : 21 : 14 : 9

Calculating the New Profit Sharing Ratio

The initial profit sharing ratio between partners A, B, and C is 4 : 3 : 2. The total parts in the initial ratio are $4 + 3 + 2 = 9$.

A new partner, D, is admitted with a $\frac{1}{8}$ share.

The remaining profit share for the old partners (A, B, C) is calculated as: $1 - \text{D's Share} = 1 - \frac{1}{8} = \frac{8}{8} - \frac{1}{8} = \frac{7}{8}$.

This remaining share of $\frac{7}{8}$ will be distributed among A, B, and C according to their old profit sharing ratio (4 : 3 : 2).

Determining New Shares for A, B, and C

Calculate the new share for each old partner by multiplying their original fraction by the remaining profit share ($\frac{7}{8}$):

  • A's New Share = Original Share $\times$ Remaining Share
    $ \text{A's New Share} = \frac{4}{9} \times \frac{7}{8} = \frac{28}{72} $
  • B's New Share = Original Share $\times$ Remaining Share
    $ \text{B's New Share} = \frac{3}{9} \times \frac{7}{8} = \frac{21}{72} $
  • C's New Share = Original Share $\times$ Remaining Share
    $ \text{C's New Share} = \frac{2}{9} \times \frac{7}{8} = \frac{14}{72} $

Incorporating D's Share

D's share is given as $\frac{1}{8}$. To maintain a common denominator with the other partners' shares (which is 72), we convert D's share: $ \text{D's Share} = \frac{1}{8} = \frac{1 \times 9}{8 \times 9} = \frac{9}{72} $

Final New Profit Sharing Ratio

The new profit sharing ratio is formed by combining the new shares of A, B, C, and D:
A : B : C : D = $\frac{28}{72} : \frac{21}{72} : \frac{14}{72} : \frac{9}{72}$
Removing the common denominator, the new ratio is: 28 : 21 : 14 : 9

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Important Questions from Partnership Accounts

  1. The ratio by which the existing partners lose in favour of the new partner is known as the __________.
  2. Amount due to outgoing partner is shown in the balance sheet as his
  3. Goodwill of a firm of X and Y is valued at ₹ 30,000. It is appearing in the books at ₹ 12,000. Z is admitted for $\frac{1}{4}$ share. What amount he is supposed to bring for goodwill ?
  4. X and Y are partners sharing profits and losses in the ratio of 3 ∶ 2. They admit Z as a new partner with 1/5 share in the profits. Calculate the new profit sharing ratio of the partners. 

  5. Ram and Shyam are partners in a firm with capital of ₹ 4,80,000 and ₹ 3,10,000, respectively. They admitted Ganesh as a partner with $\frac{1}{4}$th share of profit. Ganesh brings ₹ 3,00,000 as his capital. Ganesh's share of goodwill will be

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