Partners sometimes agree to change their profit-sharing ratio without anyone joining or leaving. Some partners gain and others sacrifice, so the gainers compensate the sacrificers.
Sacrifice and gain
- Sacrifice (or gain) of each partner = Old share − New share.
- A positive answer is a sacrifice; a negative answer is a gain.
Goodwill
Goodwill is not raised in the books (AS-26). The gaining partner compensates the sacrificing partner for his share of goodwill:
| Particulars | Dr. | Cr. |
|---|---|---|
| Gaining Partner's Capital A/c Dr. | ||
| To Sacrificing Partner's Capital A/c |
Any goodwill already appearing in the books is first written off to all partners in the old ratio.
Reserves, accumulated profits and losses
They belong to the old ratio. Either distribute them to partners in the old ratio, or — if partners want them to stay in the books — pass one adjusting entry for the net effect between gainer and sacrificer.
Revaluation of assets and liabilities
Prepare a Revaluation Account and share the profit or loss in the old ratio. When partners do not want to change the book values, pass a single adjusting entry for the net effect instead.
Recorded lectures for this chapter
4 lectures (1 h 15 min) by Ronak Dugar in Class 12 Accountancy Book 1: Accounting for Partnership Firms. Enrolled students watch them in the student portal.
- Class 1 - Basics, Gainer to Sacrificer Entry & Cases18 min
- Class 2 - Practical Question of Journal entry20 min
- Class 3- Comprehensive Question22 min
- Class 4 - Comprehensive Question where partners do not want to alter/show new values in Balance Sheet13 min
Learn this chapter with Ronak Sir
Classroom batches in Sector 9, Faridabad and recorded lectures online. Book a free demo class or call +91 83685 45620.