Page 137 - VIRANSH COACHING CLASSES

3: (Calculation of Sacrifice Ratio and New Ratio)
Pravin and Navin are partners sharing profits in the ratio of 7:3 They admit Reena for 1/5
th
share of profit which he takes equally from Pravin and Navin. Calculate sacrifice ratio and new
profit sharing ratio.
Reena’s share = 1/5
Sacrifice Ratio of P and Q = 1:1 or 1/2:1/2
Pravin’s Sacrifice = 1/5 × 1/2 = 1/10
Navin’s Sacrifice = 1/5 × 1/2 = 1/10
New Ratio = Old Ratio - Sacrifice Ratio
New Share of Pravin = 7 /10 - 1/10 = 6 / 10

New share of Navin = 3 / 10 - 1/10 = 2 / 10
Reena’s share = 1/5 share = 2/10
th
Therefore, New Ratio is 6:2:2 = 3:1:1

4: (Calculation of Sacrifice Ratio and New Ratio)
X and Y are partners sharing profits in the ratio 7:3. X surrenders 1/7th of his share and Y
surrenders 1/3rd of his share in favour of Z, a new partner. Calculate new ratio and sacrificing ratio.

Old Ratio of X and Y = 7:3 or 7/10 : 3 /10
X’s Sacrifice = 1/7 × 7/10 = 1/10
Y’s Sacrifice = 1/3 × 3/10 = 1/10
Sacrificing ratio of X and Y = 1/10 :1/10 or 1:1
Z’s share = X’s share + Y’s share = 1/10 + 1/10 = 2/10

X’s New share = Old ratio - Sacrifice ratio = 7/10 - 1/10 = 6/10
Y’s New share = Old ratio - Sacrifice ratio = 3/10 - 1/10 = 2/10

Therefore, New Ratio of X, Y and Z = 6:2:2 = 3:1:1

3.2.5
Meaning of Goodwill :
Goodwill is the benefit, name, fame, reputation, image of a business which ultimately helps the
business to earn more profits. It is also because of the honesty, business ethics and hard work done
by all the partners in the past years. Good will is calculated on the basis of part performances.
3.2.5.1
There are various methods of valuation of goodwill. For Std 12th following two main meth-
ods are included:
1) Average Profit Method
Under this method goodwill is calculated on the average basis of the past number of years of
profit. It is assumed that the firm will maintain average profit for next certain years also and so the
goodwill is calculated on the basis of certain number of years purchase of average profit.
Goodwill can be calculated as per this method by following these steps
i) Calculation of total profit
Total Profit is calculated by adding the profits of the previous years and deducting the losses, if
any.

128