What is Gaining Ratio in Partnership – Illustration

What is Gaining Ratio in Partnership

Determination of Sacrificing Ratio and Gaining Ratio is a must before any adjustments or calculations. With the help of this ratio, we will calculate the total amount of other adjustments.

The Content covered in this article: –
  • Meaning of Gaining Ratio
  • When to calculate Gaining Ratio
  • Illustration of Gaining Ratio

Meaning of Gaining Ratio: –

Gaining Ratio means when one or more partners buying (gaining) more shares of the profit of the firm from the other or retiring partners. The difference between the New ratio and the Old ratio of one partner is known as Gaining Share if the value of the difference is positive.

The formula of the Gaining Ratio: –

we can use the same formula as per sacrificing share for calculating gaining share. The values left after calculation with this formula is in negative then this value is known as gaining share of the Partner.

Sacrificing/(-Gaining) Share = Old Share – New Share

But if want to know the value as a positive value then you can apply the following formula: –

Gaining Share = New Share – Old Share

You can apply this above formula when you know that the specific partner gaining the share. like in the case of retirement of one or more partner(s) from the partnership, the remaining partner will get the share of retiring partner(s), So the remaining partner will gain the share of profit.

When to calculate Gaining Ratio: –

We need to calculate this ratio when the following two situations occur: –

  1. Change in Profit Sharing Ratio among old partners
  2. Retirement of Partner from the Partnership

Change in Profit Sharing Ratio among old partners:

Change in Profit-Sharing Ratio Among the Existing Partners means when one or more from the existing partners wants more share in the business profit then they mutually decide to change their profit sharing ratio from the earlier decided profit sharing ratio. This process is known as a reconstitution of the firm.

Retirement of Partner from the Partnership:

When one partner decided to get retired from the partnership then the remaining partners will get the share of retiring partner. it means they will gain more share of profit.

Illustration: –

A, B and C are the partner in the A&B Co. ltd. The shared profit of the firm in the ratio 4:3:3. Mr c is getting retirement from the partnership and A & B decided to share future profit in equal ratio. So, you have to calculate the Gaining ratio of the remaining partners.

Solution: –

New Ratio of A & B = 1: 1

Calculation of Gaining Share of remaining Partners

Gaining Share = New Share – Old Share

Gaining Share of A = 1 4
2 10
Gaining Share of A = 10 – 8
20
Gaining Share of A = 2 Gaining
20
Gaining Share of B = 1 3
2 10
Gaining Share of B = 10 – 6
20
Gaining Share of B = 4 Gaining
20

Gaining Ratio Between A and B = 2:4

= 1:2

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