On the eve of the retirement/death of a partner, the continuing partners acquire the profit share of the retiring partner. The ratio in which the outgoing partner’s profit share is gained or acquired by the remaining partners is known as the Gaining ratio. This ratio is calculated by taking the difference between the new ratio and the old ratio of the partners. The following are the major points of difference between the sacrificing ratio and gaining ratio.
Difference between Gaining Ratio and Sacrificing Ratio
|Basis of Difference||Sacrificing Ratio||Gaining Ratio|
|Meaning||It is the ratio in which the old partners agree to sacrifice their share of profit in favor of a new partner.||It is the ratio in which the continuing partners acquire the share of profit from an outgoing partner.|
|Calculation||Sacrificing Ratio = Old Ratio – New Ratio||Gaining Ratio = New Ratio – Old Ratio|
|Time||It is calculated at the time of admission of a new partner.||It is calculated at the time of retirement/death of an old partner.|
|Objective||It is calculated to ascertain the share of profit and loss given up by the existing partners in favor of the new partner.||It is calculated to ascertain the share of profit and loss acquired by the remaining partners from the retiring or deceased partner.|
|Effect||It reduces the profit share of the existing partners.||It increases the profit share of the remaining partners.|
A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.
Accounting software is an integral part of the computerized accounting system. The accounting software should be selected after considering the level of skill and proficiency of the accounting professionals.
Accounting Reports: When the collected data is processed and manipulated in a useful sense that can be understood by the users without any ambiguity, then it becomes information.
Transaction Processing System (TPS) refers to a computerized system that records, processes, validates, and stores routine transactions that occur in various functional areas of a business on daily basis.
In the case of Hidden Goodwill, the value of goodwill is not mentioned at the time of admission of a new partner. It can be considered as one of the methods for calculating the value of goodwill of the firm.