what do you mean by sacrificing ratio Related: New Profit Sharing and Sacrificing Ratio (part a) - Class 12, Accountancy

Question

what do you mean by sacrificing ratio Related:  New Profit Sharing and Sacrificing Ratio (part a) - Class 12, Accountancy

Answer

The sacrifice ratio is an economic ratio that measures the effect of rising and falling inflation on a country's total production and output. Costs are associated with the slowing of economic output in response to a drop in inflation. When prices fall, companies are less incentivized to produce goods and may cut back on production. The ratio measures the loss in output per each 1% change in inflation. By examining a country's historic sacrifice ratios through time, a governing body can predict what effect their policies will have on the country's output.The sacrifice ratio is calculated by taking the cost of lost production and dividing it by the percentage change in inflation.

Answer

When there is a admission of new partner in a firm old partners have to sacrifice or give up their profit sharing ratio the part of their share sacrificed by them in favour of new partner is known as sacrificing ratio.

Answer

When there is a change in the profit sharing ratio due to any of the reason, one or more of the existing partners have to surrender some of their old share in favour of one or more of other partners. That surrender of profit in ratio is calledsacrificing ratio. It is calculated as below:

Sacrificing Ratio = Old Ratio – New Ratio

The main purpose of calculating this is to determine the amount of compensation to be paid by the Gaining partner to the sacrificing partner (usually paid on the basis of proportionate amount of Goodwill).

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