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A and B are partners sharing profits and losses in the ratio of 2 : 5. They admit C on the condition that he will bring Rs. 14,000 as his share of goodwill to be distributed between A and B. C’s share in the future profits or losses will be 1/4th. What will be the new profit-sharing ratio and what amount of goodwill brought in by C will be received by A and B? 

Solution

 AB
OLD RATIO25 

C is admitted for 1/4share
Let the combined share of A, B and C be = 1
Combined share of A and B after C’s admission = 1 − C’s share
= 1-1/4 =3/4

New Ratio = Old Ratio × Combined share of A and B

A’s= 2/7 × 3/4
 = 6/28
B’s= 5/7 × 3/4
 = 15/28

New profit-sharing ratio=

ABC
6/2815/281/4      
6/2815/287/28
6157 

Distribution of C’s share of Goodwill

C’s share of Goodwill = Rs. 14,000
A will get = 14,000 × 2/7 = 4,000
B will get = 14,000 × 5/7= 10,000


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