Q.What is the new profit sharing ratio?

New profit sharing ratio is the ratio in which the continuing partners will share future profits after a reconstitution.

Whenever a partnership firm is reconstituted — a partner is admitted, or an existing partner retires or dies — the old profit sharing ratio among the original partners no longer applies to the future, because the set of partners sharing profits has changed. The partners (continuing ones, and the incoming partner in case of admission) then agree on a new profit sharing ratio, which is the ratio in which profits and losses of the firm will be shared from that point onward.

• On admission of a partner, the new ratio is worked out after deciding the incoming partner's share and the sacrifice made by old partners. …