Distinguish between the sacrificeing ratio and gaining ratio. What are the adjustment required atthe time of retirement of a partner??
Answers
Answer:
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Explanation:
Basis of Difference
Sacrificing ratio
Gaining ratio
Objective
It is calculated to ascertain the share of profit and loss given up by the existing partners in favour of new partners/partner.
It is calculated to ascertain the share of profit and loss acquired by the remaining partners (of the new firm in case of retirement) from the retiring or deceased partner.
Meaning
It is the ratio in which old partners agree to sacrifice their share of profit in favour of new partners/partner.
It is the ratio in which continuing partner acquires the share of profit from outgoing partners/partner.
Time
It is calculated at the time of admission of new partners/partner.
It is calculated at the time of retirement/death of old partners/partner.
Calculation
Sacrificing ratio = Old ratio – New ratio
Gaining ratio = New ratio – Old ratio
Effect
It reduces the profit sharing ratio of the existing partners.
It increases the profit sharing ratio of the remaining partners