What is Gaining Ratio?
When any of the partners retire from the business, his/her share of profit in the business is distributed among the continuing partner resulting in a gain in their share of profit. The partners whose share in the profits has increased due to a change in the profit sharing ratio are called Gaining Partners and the ratio in which they gained is called the Gaining Ratio.
After the retirement of a partner, the remaining partners acquire the share of the retiring partner in the agreed ratio.
Gaining Ratio is usually calculated at the time of retirement or death of a partner to pay the amount of goodwill to the retiring partner in the gaining ratio.
Gaining Ratio is calculated as follows:
Gaining Ratio = New Ratio – Old Ratio
Difference between Sacrificing Ratio and Gaining Ratio
After the admission of a new partner or retirement or death of old partners in a partnership business, the new profit sharing ratio is calculated for all the remaining partners of the business. The new profit sharing ratio brings a change in the ratio in which partners were previously distributing their profits or losses. Some partners get profited from this change while others had to sacrifice their share in the profit. To calculate the gaining and sacrificing share of the partners, the Gaining and Sacrificing Ratio is calculated.
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