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Which of the following is calculated at the time of Retirement of a Partner?
- a)Gaining Ratio
- b)Sacrifice of Retiring Partner
- c)Old Ratio
- d)Sacrifice of the employees
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Which of the following is calculated at the time of Retirement of a Pa...
At the time of retirement of death of a partner we need to calculate the gaining ratio of the existing partners. The main purpose of calculating gaining ratio is to adjust the share of goodwill at the time of retirement or death of a partner.
Most Upvoted Answer
Which of the following is calculated at the time of Retirement of a Pa...
Here the answer is wrong, Both Gaining ratio as well as sacrificing ratio should be found for treatment of Goodwill of the firm. So, Both option (A) & (B) is correct. (In many of the books it is written) but you have calculate both the things because you cannot do treatment for goodwill of the firm with calculating both.
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Which of the following is calculated at the time of Retirement of a Pa...
Calculation at the time of Retirement of a Partner
When a partner retires from a partnership firm, various calculations need to be made to determine the financial implications of the retirement. One of these calculations is the gaining ratio.
Gaining Ratio
The gaining ratio is calculated at the time of retirement of a partner. It determines the new profit sharing ratio among the remaining partners after the retirement. The gaining ratio is necessary because the retiring partner's share of profit or loss needs to be distributed among the remaining partners.
Explanation
At the time of retirement, the retiring partner's share in the firm's assets and liabilities is settled. The retiring partner may receive a certain amount as a share of goodwill, if applicable. The remaining partners then agree on a new profit sharing ratio among themselves.
The calculation of the gaining ratio involves comparing the existing profit sharing ratio with the new profit sharing ratio. The difference between the two ratios represents the gaining ratio.
For example, let's say there are three partners A, B, and C with a profit sharing ratio of 3:2:1. If partner C retires, and A and B decide to share profits equally going forward, the new profit sharing ratio would be 1:1. The gaining ratio would then be 1:0:0, as partner A gains 1/3 of partner C's share and partner B gains 2/3 of partner C's share.
The gaining ratio is used to distribute the retiring partner's share of profit or loss among the remaining partners. It helps in maintaining fairness and ensuring that the financial impact of the retirement is properly accounted for.
In conclusion, the gaining ratio is an important calculation made at the time of retirement of a partner. It determines the new profit sharing ratio among the remaining partners and helps in distributing the retiring partner's share of profit or loss.
When a partner retires from a partnership firm, various calculations need to be made to determine the financial implications of the retirement. One of these calculations is the gaining ratio.
Gaining Ratio
The gaining ratio is calculated at the time of retirement of a partner. It determines the new profit sharing ratio among the remaining partners after the retirement. The gaining ratio is necessary because the retiring partner's share of profit or loss needs to be distributed among the remaining partners.
Explanation
At the time of retirement, the retiring partner's share in the firm's assets and liabilities is settled. The retiring partner may receive a certain amount as a share of goodwill, if applicable. The remaining partners then agree on a new profit sharing ratio among themselves.
The calculation of the gaining ratio involves comparing the existing profit sharing ratio with the new profit sharing ratio. The difference between the two ratios represents the gaining ratio.
For example, let's say there are three partners A, B, and C with a profit sharing ratio of 3:2:1. If partner C retires, and A and B decide to share profits equally going forward, the new profit sharing ratio would be 1:1. The gaining ratio would then be 1:0:0, as partner A gains 1/3 of partner C's share and partner B gains 2/3 of partner C's share.
The gaining ratio is used to distribute the retiring partner's share of profit or loss among the remaining partners. It helps in maintaining fairness and ensuring that the financial impact of the retirement is properly accounted for.
In conclusion, the gaining ratio is an important calculation made at the time of retirement of a partner. It determines the new profit sharing ratio among the remaining partners and helps in distributing the retiring partner's share of profit or loss.
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