On what occasions sacrificing ratio is used?
Sacrificing ratio is used when a new partner brings in premium for goodwill to compensate the old partners for their loss of share in the super profits of the firm. The amount brought in by the new partner is shared by the existing partners in this ratio.
It is also used to determine the new profit sharing ratio of the partners. The sacrificing ratio helps in calculating the specific share each old partner forgoes in favour of the new partner. It is calculated by deducting each partner’s new share from his old share, ensuring the distribution of goodwill premium reflects the actual sacrifice made by each partner.
Explanation
The provided context explicitly states that the premium for goodwill brought in by the new partner is shared by existing partners in the sacrificing ratio. This ratio represents the loss of share in super profits. Additionally, the context describes using the sacrificing ratio to work out the new profit sharing ratio by deducting the new share from the old share when the acquisition ratio isn't specified.