CA FOUNDATION: ACCOUNTING · PARTNERSHIP ACCOUNTS

Admission of a partner: new profit-sharing ratio

New share = Old share − Share sacrificed. If the new partner’s share comes from old partners in their old ratio, each old share is multiplied by (1 − new partner’s share).

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Worked examples

Example 1 · level 1

Amit and Bhavna share profits 5:3. Chetan is admitted for a 1/5 share, which he acquires from Amit and Bhavna in their old ratio. What is Amit’s new share? (fraction)

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Remaining for old partners = 4/5.
Amit = 5/8 × 4/5 = 1/2.

Answer: 1/2

Example 2 · level 2

Pooja and Qasim share profits 3:4. Rahul is admitted for a 1/5 share, which he takes entirely from Pooja. What is Pooja’s new share? (fraction)

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Pooja’s old share = 3/7.
3/7 − 1/5 = 15/35 − 7/35 = 8/35.

Answer: 8/35

Example 3 · level 3

Ravi and Sneha share profits 3:1. Tarun is admitted; Ravi surrenders 1/8 and Sneha surrenders 1/8 of the firm’s profit in favour of Tarun (so Tarun gets 1/4). What is Ravi’s new share? (fraction)

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Ravi’s new share = 3/4 − 1/8 = 24/32 − 4/32 = 5/8.

Answer: 5/8