How to find sacrificing ratio when sacrifice of old partners for new partner is given ?
Answers
New Profit Sharing Ratio
There are different cases when partnership can have new profit sharing ratio:
Sometimes the partners may decide to change their existing profit sharing ratio, without any admission or retirement of partner,
At the time of admission of the new partner
At the time of retirement or death of an old partner
This may result in a gain to a few partners and loss to others. The partners who are in profit due to this change in the profit sharing ratio should compensate the sacrificing partner/partners.
New profit sharing ratio: Ratio in which the partners decide to share profits/losses in future.
Gaining ratio: Ratio in which the partners have agreed to gain their share of profit from other partners.
Sacrificing ratio: Ratio in which the partners have agreed to sacrifice their share of profit in favour of other partners. Sacrificing ratio= Old Ratio – New Ratio
New Profit Sharing and Gaining Ratio
Gaining Ratio
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)