Commerce Exam > Commerce Questions > New Ratio – Old Ratio = ?a)New ratio of...
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New Ratio – Old Ratio = ?
- a)New ratio of continuing partners
- b)Sacrificing ratio
- c)Both Sacrificing ratio and New ratio of continuing partners
- d)Gain Ratio
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sac...
At the time of retirement or death of a partner, gain ratio of remaining partners is calculated as follows:
New Ratio – Old Ratio = Gain Ratio
New Ratio – Old Ratio = Gain Ratio
Most Upvoted Answer
New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sac...
Understanding the Concept
In partnership accounting, the ratios of profit-sharing can change when new partners are admitted or existing partners change their ratios. This leads to the calculation of new ratios and sacrificing ratios.
Key Definitions
- New Ratio of Continuing Partners: This is the ratio in which the remaining partners will share the profits after a new partner is admitted.
- Sacrificing Ratio: This represents the ratio in which the existing partners give up their share of profits to accommodate the new partner.
Formula Explanation
When a new partner is introduced into a partnership, the change in profit-sharing ratios can be expressed mathematically. The change can be represented as:
New Ratio - Old Ratio = Gain Ratio
Here’s why this formula works:
- The New Ratio indicates how profits will be shared after the new partner joins.
- The Old Ratio is the previous sharing ratio before the new partner was added.
- The Gain Ratio reflects the amount of profit each continuing partner is gaining or losing due to the adjustment in ratios.
Conclusion
Thus, the equation "New Ratio - Old Ratio" effectively gives us the Gain Ratio, which is the difference that results when the new profit-sharing structure is compared to the old one. This demonstrates why the correct answer to the question is option 'D' – Gain Ratio. Understanding this relationship is essential for accurately assessing impacts on profit-sharing in partnerships.
In partnership accounting, the ratios of profit-sharing can change when new partners are admitted or existing partners change their ratios. This leads to the calculation of new ratios and sacrificing ratios.
Key Definitions
- New Ratio of Continuing Partners: This is the ratio in which the remaining partners will share the profits after a new partner is admitted.
- Sacrificing Ratio: This represents the ratio in which the existing partners give up their share of profits to accommodate the new partner.
Formula Explanation
When a new partner is introduced into a partnership, the change in profit-sharing ratios can be expressed mathematically. The change can be represented as:
New Ratio - Old Ratio = Gain Ratio
Here’s why this formula works:
- The New Ratio indicates how profits will be shared after the new partner joins.
- The Old Ratio is the previous sharing ratio before the new partner was added.
- The Gain Ratio reflects the amount of profit each continuing partner is gaining or losing due to the adjustment in ratios.
Conclusion
Thus, the equation "New Ratio - Old Ratio" effectively gives us the Gain Ratio, which is the difference that results when the new profit-sharing structure is compared to the old one. This demonstrates why the correct answer to the question is option 'D' – Gain Ratio. Understanding this relationship is essential for accurately assessing impacts on profit-sharing in partnerships.
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New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sacrificing ratioc)Both Sacrificing ratio and New ratio of continuing partnersd)Gain RatioCorrect answer is option 'D'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sacrificing ratioc)Both Sacrificing ratio and New ratio of continuing partnersd)Gain RatioCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sacrificing ratioc)Both Sacrificing ratio and New ratio of continuing partnersd)Gain RatioCorrect answer is option 'D'. Can you explain this answer?.
New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sacrificing ratioc)Both Sacrificing ratio and New ratio of continuing partnersd)Gain RatioCorrect answer is option 'D'. Can you explain this answer? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sacrificing ratioc)Both Sacrificing ratio and New ratio of continuing partnersd)Gain RatioCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sacrificing ratioc)Both Sacrificing ratio and New ratio of continuing partnersd)Gain RatioCorrect answer is option 'D'. Can you explain this answer?.
Solutions for New Ratio – Old Ratio = ?a)New ratio of continuing partnersb)Sacrificing ratioc)Both Sacrificing ratio and New ratio of continuing partnersd)Gain RatioCorrect answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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