What is gain ratio and how is it different from sacrifice ratio?

Gain Ratio = New Ratio − Old Ratio (for remaining partners on retirement). Sacrifice Ratio = Old Ratio − New Ratio (for old partners on admission). On retirement, remaining partners gain the leaving partner's share; on admission, old partners sacrifice.

How is profit calculated for a deceased partner?

Profit up to date of death is calculated either on a time basis (last year's profit × months/12) or turnover basis (last year's profit × (sales to death date/last year's total sales)). The deceased partner's share is credited to their executor's account.

What happens to goodwill when a partner retires?

The retiring partner's share of goodwill is borne by the remaining partners in their gain ratio. Journal: Dr Remaining Partners' Capital A/c (gain ratio); Cr Retiring Partner's Capital A/c.

Retirement and Death of a Partner

Reconstitution of Partnership — Retirement and Death • Class 12 Accountancy • NCERT • CBSE

Gain Ratio = New Ratio − Old Ratio (for remaining partners). Retiring partner's share of goodwill borne by remaining partners in gain ratio. Retiring partner paid: capital + share of goodwill + share of revaluation profit + share of reserves.

Key Formulas

Gain Ratio = New Ratio − Old Ratio
Sacrifice Ratio (admission) = Old Ratio − New Ratio
Amount due to retiring partner = Capital + Goodwill share + Reserves − Drawings

Frequently Asked Questions

What is gain ratio and how is it different from sacrifice ratio?: Gain Ratio = New Ratio − Old Ratio (for remaining partners on retirement). Sacrifice Ratio = Old Ratio − New Ratio (for old partners on admission). On retirement, remaining partners gain the leaving partner's share; on admission, old partners sacrifice.
How is profit calculated for a deceased partner?: Profit up to date of death is calculated either on a time basis (last year's profit × months/12) or turnover basis (last year's profit × (sales to death date/last year's total sales)). The deceased partner's share is credited to their executor's account.
What happens to goodwill when a partner retires?: The retiring partner's share of goodwill is borne by the remaining partners in their gain ratio. Journal: Dr Remaining Partners' Capital A/c (gain ratio); Cr Retiring Partner's Capital A/c.

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