Question

How is Gain Ratio calculated?​

Answer 1

Answer:

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Explanation:

Answer 2

Answer:

Gaining ratio is calculated at the time of retirement or death of a partner. It is the ratio in which the remaining partners acquire the outgoing partner’s share of profit

When the partner retires, the profit sharing ratio of the continuing partners gets changed. Continuing partners distribute the share of retiring partner among them.

Gaining ratio= New Ratio – Old Ratio (if positive)

Explanation:

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Case 1: When the share of retiring partner is acquired by old partners in an old ratio

Amit, Sumit, and Punit share profit and losses in the ratio of 3:2:1, respectively. Amit retires and the remaining partners decide to share to take Amit’s share in the existing ratio i.e. 2:1. Calculate the new ratio and gaining ratio.

Solution: The existing ratio between Sumit and Punit= 2/6 and 1/6

Amit’s ratio (retiring partner) = 3/6

Amit’s share taken by Sumit and Punit in the ratio of 2:1

Sumit gets = 3/6 * 2/3 = 6/18

Punit gets = 3/6 * 1/3 = 3/18

New ratio between Sumit and Punit is = 6:3 = 2:1

Gaining ratio= New Ratio – Old Ratio

Sumit’s gain = 2/3 – 2/6 = 2/6

Punit’s gain = 1/3 – 1/6 = 1/6

Gaining ratio = 2:1

New Ratio = 2:1

Case 2: When the share of retiring partner is acquired by old partners in old specified proportions

Amit, Sumit, and Punit share profit and losses in the ratio of 2:3:1, respectively. Amit retires and the remaining partners decide to share to take Amit’s share equally. Calculate the new ratio and gaining ratio.

Solution: The existing ratio between Sumit and Punit= 3/6 and 1/6

Amit’s ratio (retiring partner) = 2/6

Amit’s share taken by Sumit and Punit in the ratio of 1:1

Sumit gets = 2/6 * 1/2 = 1/6

Sumit’s new share = 3/6 + 1/6 = 4/6

Punit gets = 2/6 * 1/2 = 1/6

Punit’s new share = 1/6 + 1/6 = 2/6

New ratio between Sumit and Punit is = 4:2 = 2:1

Gaining ratio is given the question i.e. 1:1

Gaining ratio = 1:1

New Ratio = 2:1

Case 3: When the share of retiring partner is acquired fully by one of the continuing partners

Amit, Sumit, and Punit share profit and losses in the ratio of 4:5:2, respectively. Amit retires and Punit acquires Amit’s share. Calculate the new ratio and gaining ratio.

Solution: Punit’s new share = 2/11 + 4/11 = 6/11

Sumit share remains unchanged = 5/11

The new ratio between Sumit and Punit is = 5:6

Gaining ratio in this case between Sumit and Punit will be

Sumit’s gain = 5/11 – 5/11 = Nil

Punit’s gain = 6/11 – 2/11 = 4/11

This shows that entire gain is taken by Punit.